The Financial Conduct Authority (FCA) is updating its existing guidance on social media and customer communications to better protect consumers in the era of the ‘finfluencer’ or financial influencer.
Announcing the update, the regulator conceded its existing guidance had been issued back in 2015. But it added that while many of its key principles still hold true, they are heavily based around character-limited media such as Twitter and make no reference to the use of influencers communicating financial promotions
Consequently, the guidance is being updated and the existing rules under FG15/4 will be retired once the new guidance is finalised.
The new guidance will be consulted on over the next eight weeks.
Updated guidance
The updated guidance put forward by the regulator will mean it will retain the key principles of FG15/4, including its expectations for financial promotions to be standalone compliant.
It will also retain the same expectations on the prominence of required information but will use the guidance to clarify how it expects these principles to be applied to different social media marketing channels. It will also look to address specific design features on social media that act to obscure required information.
The regulator will provide graphic examples of promotions across a variety of financial services to aid in the understanding of expectations.
Where applicable, the Consumer Duty will raise the FCA’s expectations of firms communicating financial promotions on social media above the requirement of Principle 7 to be ‘clear, fair and not misleading’.
Principle 12 (alongside PRIN 2A) requires firms to act to deliver good outcomes for retail customers and the regulator is using the new guidance to supplement its expectations of this requirement for communications on social media.
The guidance also touches in emerging marketing trends on social media such as affiliate marketing.
It stresses to firms that they should be monitoring the communications of those using their affiliate links to ensure good outcomes for consumers.
The FCA added it is also seeking to address the harm that can occur where UK consumers interact with financial promotions which direct them to a non-UK entity while the UK consumer still believes they are engaging with an FCA regulated firm.
Within the guidance, the regulator suggests techniques that firms can use to mitigate this risk, as well as stressing to firms that any communication capable of having an effect within the UK will be subject to the rules.
But the guidance will also tackle harm arising from influencers communicating approved financial promotions, particularly for firms approving communications for HRIs.
In PS22/10 the regulator strengthened the requirements for Section 21 approvers of promotions for investment business, including HRIs.
The guidance highlights how these should apply to firms approving the communications of influencers on social media, explaining that they should play an active role in ensuring the continuing compliance of the relevant communication for its lifetime.
Additionally, the guidance aims to tackle harm occurring from unauthorised influencers communicating illegal financial promotions.
The regulator said it had seen cases of influencers communicating financial promotions without realising they fell within the financial promotion perimeter. This is because firms and influencers often assume there must be direct monetary compensation for an influencer’s post to be subject to the financial promotion regime.
The regulator has also provided additional guidance on the perimeter in relation to financial promotions on social media under Section 21 of the Financial Services and Markets Act 2000.
Scope of the guidance
The regulator says the guidance is of interest to consumers and consumer groups, firms communicating or approving financial promotions on social media, industry groups and trade bodies, influencers and unauthorised persons communicating financial promotions on social media and social media platforms and overseas firms communicating financial promotions to UK consumers on social media.
Work with the ASA
This year the FCA has been ramping up its scrutiny of online, often illegal, financial promotions, recognising the significant increase in notoriety of ‘finfluencers’ and the potential for consumer harm taking place online.
This work has seen it team up with the Advertising Standards Authority (ASA) to help educate consumers and influencers about the risks involved in promoting financial products.
This work has included an infographic, roundtable discussions and live events to build up awareness of the harm that can take place.
The FCA added its engagement has also helped secure changes to the advertising policies of several big tech companies to only allow financial promotions that have been approved by FCA-authorised firms. The regulator added it will be continuing this engagement to ensure more is done to protect consumers.
Ads falling short of existing guidance
Lucy Castledine, director, consumer investments at the FCA, said: “We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm.
“We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online.
“And for those touting products illegally, we will be taking action against you.”