FCA Consults on Revamped Guidance for Financial Promotions on Social Media | Latham & Watkins LLP

FCA Consults on Revamped Guidance for Financial Promotions on Social Media | Latham & Watkins LLP

Regulator clarifies that present FCA guidelines will proceed to use however may even mirror the evolving panorama of monetary promotions on social media.

On 17 July 2023, the FCA revealed a steering session (GC23/2) regarding monetary promotions on social media.

Acknowledging that social media is “being utilized by many shopper as a go-to supply of data”, the FCA is updating its present steering on social media and buyer communications to take into consideration the altering panorama of social media. The present steering, FG15/4: Social Media and Customer Communications, might be retired as soon as the brand new steering is finalised.

Not surprisingly, the FCA has recognized social media promotion as an space of regulatory focus. The session notes that “69% of monetary promotions communicated or accepted by authorised companies which have been amended or withdrawn following our intervention concerned web site or social media promotions”.

Notably in February 2023, the FCA expressed considerations in relation to fin-fluencers (please see Latham’s earlier weblog submit), and in May 2023 it introduced a collaborative effort with the Advertising Standards Authority (the ASA) to coach fin-fluencers concerning the dangers of selling monetary merchandise.

Additionally, within the 2023/24 Business Plan, the FCA recognized the next key actions:

“Increase our technological functionality to go looking throughout social media platforms to proceed to establish unlawful monetary promotions quicker and in bigger volumes. Work with businesses and ‘fin-fluencers’ to coach them about their obligations when selling monetary providers”.
“Continue work with social media platforms and on-line search engines like google and yahoo to make sure they enhance the way in which they establish and take away unlawful content material”.

The FCA said that lots of the key of ideas of FG15/4 nonetheless maintain, however on condition that use of social media has developed since that steering was finalised, new platforms are getting used for monetary promotions. This revised steering will due to this fact mirror the present social media panorama.

The revised steering demonstrates how the FCA is working with different regulators who additionally focus on the net and social media house (on this case the ASA and the Office of Communications (Ofcom)), an more and more widespread theme as regulators grapple with easy methods to convey on-line exercise throughout the conventional monetary providers regulatory perimeter.

Revised Guidance

The revised steering addresses the next areas:

1. Prominence of Information Required

The steering session clarifies that the FCA’s expectations stay the identical in relation to the prominence of required data. It options useful illustrative examples of each compliant and non-compliant monetary promotions and a desk setting out the prominence requirements relevant to the assorted social media channels. The FCA remarks that “there must be stability in how monetary services are promoted, so that customers are knowledgeable not solely of the potential advantages but additionally of the related dangers”. The FCA factors out that for some services, social media will not be an acceptable promoting medium (debt counselling is offered for example of a service which can be too advanced to promote appropriately on social media). Firms should utilise correct programs and controls in managing promotions on social media. They should additionally be certain that they adhere to the necessities to incorporate threat warnings and different required statements in promotions for sure services. Firms approving the monetary promotion of an influencer are additionally suggested to pay specific consideration to the influencer’s viewers demographics and whether or not that viewers is more likely to reveal any traits of vulnerability.

2. Consumer Duty and Increased Expectations of Firms

The FCA reminds companies that monetary promotions are topic to the core requirement to be honest, clear, and never deceptive. The Consumer Duty, which comes into drive on 31 July 2023 for new and renewal clients, builds upon this core requirement, mandating that companies ship good outcomes for retail shoppers and promote shopper understanding. The FCA notes that it has noticed shoppers on social media being repeatedly bombarded with monetary promotions. Firms are reminded to make sure that their advertising methods are devised with the Consumer Duty in thoughts. Communications must be commonly examined, monitored, and tailored to help good shopper outcomes.

3. Affiliate Marketing

In relation to online marketing, the FCA stresses that companies ought to monitor and take proactive accountability for affiliate entrepreneurs and their communication of monetary promotions. It additionally notes that if an affiliate marketer is speaking a monetary promotion containing the agency’s referral hyperlink with out the agency having developed, created, or managed the content material of that communication, the FCA could take into account that the agency is accountable for that communication and could be liable for that monetary promotion.

4. High-Risk Investments (HRIs)

As a part of the Consumer Investment Strategy, the FCA is in search of to scale back total retail shopper involvement in HRIs, significantly when a retail shopper demonstrates a low-risk tolerance or weak traits. Accordingly, on this steering session, the FCA seeks to remind companies that HRIs are topic to particular promotion restrictions beneath COBS 4.12A, COBS 4.12B and COBS 22. It additionally notes that sure investments are banned from mass advertising to retail traders and others akin to crowdfunding, cryptoassets, and CFDs are topic to further restrictions. Firms are additional reminded that they “ought to guarantee they’re taking part in an energetic position in making certain the promotion stays compliant for their lifetime”.

5. Perimeter Issues

The FCA notes that it has seen situations through which an influencer communicated a monetary promotion with out approval to take action because the influencer didn’t admire that the monetary promotion restriction applies. The FCA reminds companies that “any type of communication (together with by means of social media) is able to being a monetary promotion if it contains an invite or inducement to interact in funding exercise”. It additionally famous that this contains “personal” or “by-invitation solely” social media platforms. The steering session units out a number of examples which, within the FCA’s view, would fulfill the “in the middle of enterprise” take a look at beneath the monetary promotion regime.

Firms are additionally reminded of the principles and the particular authorized necessities (together with the FCA Handbook provisions) on unsolicited digital communications.

6. Record Keeping

Firms are reminded to make sure that they’ve satisfactory record-keeping and sign-off provisions on digital media communications.

Next Steps

The FCA is welcoming views from events by 11 September 2023. It intends to contemplate responses to the session and can search to publish last steering later in 2023.


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