FCA consults on UK social media financial promotion guidance

The FCA said its proposals for new social media guidance (28-page / 2.22MB PDF) would modernise the information that firms should use when promoting financial products or services online. The regulator is also consulting on extending its guidance to reflect the current ways social media is being used to advertise financial services and products.

Financial regulation and enforcement expert Jonathan Cavill of Pinsent Masons said: “The FCA’s new proposed guidance on financial promotions on social media looks to retire previous guidance which is almost ten years old and is, arguably, no longer fit for purpose. Today, for example, social media is treated as a key marketing tool for financial services and ‘finfluencers’ are becoming more active.”

The consultation comes amid an upswing in FCA scrutiny of online financial promotions. It said it recognised the significant increase in notoriety of ‘finfluencers’ and the potential for consumer harm to take place online. In recent months officials have produced information, alongside the Advertising Standards Authority, to help educate consumers and influencers about the risks involved in promoting financial products. The FCA also recently secured changes to the advertising policies of several ‘big tech’ companies to only allow financial promotions that have been approved by FCA-authorised firms.

“The proposed new guidance comes right on the heels of the FCA’s recent work regarding crypto marketing. With this increased focus on social media, the regulator is keen to ensure that consumers are able to access high quality marketing information and are able to make informed decisions, irrespective of the channel used – including social media – to ensure good customer outcomes,” Cavill said.

He added: “While the Consumer Duty is the FCA’s new keystone aimed at ensuring good customer outcomes – which will include enhancing expectations around firm’s communications and financial promotions – this new proposed social media guidance will give firms additional support and direction in meeting compliance under the regulatory regime when utilising social media. But it would only be guidance, and not a rule.”

“Not complying with the proposed guidance would therefore not necessarily be a breach of the FCA rules. This means that the new proposals by the FCA may not have enough ‘bite’ to tackle the growing influx of social media scams and disinformation,” Cavill said.

The new social media consultation follows the announcement of new advertising rules for crypto firms marketing to UK consumers. From 8 October, the FCA will ban incentives to invest in crypto, such as ‘refer a friend’ bonuses. Firms must also introduce clear risk warnings and a 24-hour cooling off period to give first-time investors the time to consider their investment decision. These measures are similar to the regime in place for other high-risk investments.

The FCA is consulting on its proposed guidance until 11 September 2023.