The FCA are hot on the heels of financial promotions and ensuring financial services firms stick to the rules.
In February 2024, the FCA fined a former director of London Capital & Finance, who was responsible for compliance and signing off on financial promotions. It was found he recklessly approved financial promotions that were misleading, which contributed to thousands of investors being misled. The FCA mentioned that the approver should have ensured the financial promotions were “fair, clear and not misleading”.
The fine was timely, as the FCA published in March 2024 the Finalised guidance on financial promotions on social media (FG 24/1) ("Guidance"), which zeros in on the importance of communicating financial promotions on social media (i.e. LinkedIn, Facebook, TikTok, Instagram, etc.) clearly, fairly and without misleading consumers. Social media channels have emerged as a strategic marketing tool for showcasing financial products and services to consumers, and the Guidance reinforces the FCA’s expectations of firms and social media influencers ("finfluencers") when promoting and posting. The Guidance also considers the introduction of the Consumer Duty and its applicability to financial promotions on social media.
Key Points of the FCA Guidance.
Whilst the Guidance does not create new obligations for those that promote financial products and services on social media, it indicates how they might approach complying with their existing regulatory obligations. It describes how finfluencers or other affiliate marketers might fall within the regulatory realm of the financial promotions rules, albeit being unauthorised persons. Importantly, influencers who promote financial products or services that are subject to the FCA's financial promotions rules, without being authorised, may be committing a criminal offence. Therefore, FCA-authorised firms must approve influencers financial promotions that promote financial products or services on their posts.
Firms promoting on social media should take into account the following points:
Financial promotions on social media must be clear, fair and not misleading. Firms must support consumer understanding by providing a balanced view of the benefits and risks on the product and service they are promoting.
Prescribed risk warnings must be displayed noticeably and not obscured on social media posts. Special attention to the space and character limits in each post is required. For example, social media posts which are character limited may present an issue where potential risk warnings may be cut from a platforms functionality. The FCA has presented some "do's and don'ts" relating to risk warning prominence standards on social media:
Social media may not be an appropriate channel for promoting complex financial products due to character limits and other restrictions. The social media post may not be sufficient to explain the product or service and its complexity.
In accordance with Consumer Duty rules, communications should enable informed consumer decision-making. Firms promoting on social media need to ensure that their target market and marketing strategies are directed at the right audience.
Firms need to ensure they have proper oversight over their affiliate marketers. Firms must have appropriate monitoring and controls, and take responsibility for financial promotions made by their affiliate marketers, regardless on whether firms were involved in the production of the post or content.
The Guidance aims to promote better compliance and consumer protection regarding financial promotions across all social media platforms.
Contact us and schedule a free consultation to find out how Compliance Angle can assist with your financial promotions requirements. Call us on 07427792594 or send us an email at info@complianceangle.co.uk