The FCA has acknowledged that the use of social media to communicate with customers has given start-up and smaller firms a presence in the marketplace, that in the past they might not have been able to achieve.
With this in mind, the FCA has recently published a Guidance Consultation (GC14/6) to clarify and confirm their approach to the supervision of financial promotions. The FCA recognises there are significant benefits for consumers from the use of social media by firms, however at the core of the Guidance is Principle 7, according to which all communications should be “fair, clear, and not misleading”.
The following is a summary of the key points addressed in the Guidance;
- Any form of communication, regardless of the medium, which includes an invitation or an inducement to engage in investment activity, is considered a financial promotion.
- Social media communications can reach a large audience quickly, therefore are regarded as financial promotions and must be fair, clear and not misleading.
- In order for a financial promotion to fall within the FCA rules it must be made “in the course of business”, which entails a commercial interest on the part of the communicator.
- Financial promotions which relate to investment products must be easily identifiable as financial promotions. The use of ‘#ad’ is widely accepted on media such as Twitter.
- Each communication, whether communicated on the same or different social media platforms, must be considered individually and must comply with the rules.
- Firms are required to include risk warnings in promotions in accordance with COBS 4.5.2.
- The use of image advertising with limited written information is exempt from the requirements in COBS 4, although it must still be fair, clear and not misleading.
- Firms are responsible for someone else’s communication being forwarded or re-tweeted.
Firms must ensure that all digital media communications are signed off in accordance with COBS 4.10.2.R and maintain adequate records of all such communications.
It is clear from the consultation that the FCA understands that social media is becoming a medium of choice to communicate with customers and, to meet the objectives of consumer protection and effective competition, it is essential that all firms using social media consider the relevant FCA guidance and rules.
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