Social media guidance for the promotion of financial services and products

Social media enables marketing to reach a massive audience at the touch of a button and in lightning speed. This is great for business - social media can supercharge advertising outreach. It is also great for consumers - a super easy source of information BUT there are dangers out there and the FCA considers it crucial that "financial promotions on social media are of good quality and are fair, clear and not misleading. Consumers should be able to trust that the information they receive online about financial products and services is reliable". 

"Trust" is a big factor and one of the key challenges is enabling an environment where the targets of the advertising and marketing campaigns, the consumers, can trust the information that they are provided with. This is why the need for the effective regulation of financial promotions has come back to the top of the regulatory agenda and also why, given the effects of digital innovation, the FCA is collaborating with other regulators in this space.    

The FCA is currently consulting with a view to updating its existing guidance on social media and customer communications which dates back to 2015 (FG15/4), and while many of the fundamental principles of that guidance are still meaningful, so much has changed in the world since then: social media has developed, new communication channels have emerged, new products are trending, many young consumers have entered the markets, and financial "influencers" or "finfluencers" have entered the arena of financial services and products promotion.

It is recognised that "consumers exhibit high levels of trust in finfluencers, but their advice can often be misleading". Influencers may have significant followings but no financial expertise and yet use their digital presence to persuade consumers to make financial decisions. The FCA has already collaborated with the Advertising Standards Authority (ASA) by producing information to assist influencers who are approached to promote financial products or services, with a view to encouraging them to consider whether they are the right persons to promote such products and services, and draw their attention to the risks associated with illegal financial promotions (see our previous blog post here). There are specific requirements of the ASA that firms and financial influencers should make sure that they are familiar with. Additional requirements are likely to flow from the Government's "Online Safety Bill" (OSB) which will apply in the platforms space to create a framework of systems and processes to "mitigate the risks to users posed by the presence and dissemination of illegal content on their sites". This new regime will be overseen by Ofcom which has collaborated with the FCA on a shared understanding of how the obligations on platforms under OSB will interact with the law on financial promotions.

The statistics seem to suggest that many consumers look to social media for investment information, there is a growing trend for financial products and services to be marketed on social media, and there have been a number of regulator interventions related to promotions on social media. Social media is a territory in which there is potential for widespread consumer harm. Agile and effective regulation is therefore going to be essential in order to ensure that consumers are enabled to make good decisions, and that they get appropriate and clear information.

Regulation in this space will continue to affect a range of persons including:

• consumers;
• any regulated businesses promoting financial products and services on social media (including overseas firms who use social media to reach consumers in the UK);
• "influencers" and "finfluencers" who are used to add credibility to social media promotions; and
• social media platform operators.

Although no rule changes will be made, and the cornerstones of FG15/4 will remain, new guidance will be used to clarify how the existing regulatory structure will fit with the new social media landscape. The Consumer Duty is also expected to raise the FCA's expectations of firms communicating financial promotions on social media given the requirement to ensure that good outcomes are delivered for consumers. The FCA is consulting for views on a number of areas including:

• the prominence of required information in social media settings;
• expectations under the Consumer Duty for communications on social media;
• affiliate marketing;
• shared social media profiles between UK and non-UK entities; and
• the financial promotion perimeter.

The consultation also sets out draft guidance covering the following:

• what constitutes a financial promotion - including crypto asset promotions (which are subject to separate and specific rules and guidance), territorial application, illegal and non-compliant financial promotions, and the "business test";
• the financial promotion rules - the overriding and central requirement for financial promotions to be "fair, clear and not misleading", the additional requirement for financial promotions directed at retail customers to "deliver good outcomes for retail customers and promote consumer understanding", the need to consider the means by which material on social media is distributed and the consequences and risks of promotions being received by non-intended recipients;
• the requirement for financial promotions to be "standalone compliant", the need for supporting information for more complex products, and the requirement for prominence; 
• the need for balance so that consumers are informed not just of the potential benefits but also of the risks associated with the financial products and services that are being promoted, the requirement for firms to establish and maintain appropriate systems and controls (including around approvals and record-keeping) to manage their promotions, including the need for firms to ensure that "financial influencers" understand the products or services that they are promoting and are aware of all applicable rules;
• risk warnings and the core need for these to be clear and prominent with additional and more prescriptive requirements in specific sectors, guidance around the use of design features that can obscure important information and issues around the truncation of risk warnings, and the specific promotion restrictions applicable to high-risk investments;
• the new Consumer Duty standards and the need for firms to "consider how their marketing strategies align with acting to deliver good outcomes for retail customers", the need to ensure that consumers (particularly vulnerable ones) are not subject to excessive targeting, the question of whether social media is a suitable channel for advertising, and the requirement for firms to "test, monitor and adapt communications to support good consumer outcomes";
• the risks of sharing or forwarding communications and the difficulties associated with promotions being distributed beyond their originally intended market audience, the specific legal requirements applicable to marketing through electronic media, and the stated intention of the Government to extend the current and limited bans on cold calling to cover all consumer financial services and products;
• considerations around approvals of financial promotions including the need for firms to consider the demographics of any financial influencer's audience (particularly those in that audience who might be vulnerable) before working with them, the need for firms to ensure that influencers understand the products that they are promoting, and the new, strengthened monitoring requirements for firms approving investment related financial promotions; and
• the risks of promotions being communicated in chatrooms and forums and the use of memes that "hype up specific investments".

The FCA is looking for views and comments from respondents on the proposed guidance by 11 September 2023 and will aim to finalise the guidance later in 2023.

Social media has become an increasingly vital part of firms’ marketing strategies, allowing them to reach a mass audience at increasing speed and frequency. While this has helped firms communicate with consumers more effectively, poor quality financial promotions on social media can lead to significant consumer harm due to their wide reach and the complex nature of financial services.

https://www.fca.org.uk/publication/guidance-consultation/gc23-2.pdf