The rules and principles which apply
Social media share the characteristic of being digital and can be defined as ‘websites and applications that enable users to create and share content or participate in social networking’.
The following is a non-exhaustive list:
- microblogs (Twitter)
- social and professional networks (Facebook, LinkedIn, Google+)
- image and video-sharing platforms (YouTube, Instagram, Vine, Pinterest)
The FCA view is that any form of communication (including through social media) is capable of being a financial promotion, depending on whether it includes an invitation or inducement to engage in financial activity, this could also include, for example, ‘memes’ or ‘advergames’, where promotional messages are placed in an entertainment context or application.
A financial promotion must be made ‘in the course of businesses’ to fall within regulatory scope. The FCA has published guidance on this in the Perimeter Guidance manual (PERG 8). The ‘in the course of business’ test requires a commercial interest on the part of the communicator. It is intended to exclude genuine non-business communications, so social media conversations involving groups and individuals not acting in the course of business are therefore outside regulatory scope.
Digital communications of all types, but including social media, are not limited by national borders. There are also of course a number of measures in place within the European Economic Area (EEA) to facilitate trade and commerce within the EEA. The FCA rules cover all financial promotions capable of having an effect in the UK, unless an exemption is available.
The Consumer Duty
Under Principle 7 and Principle 12 of the Principles for Businesses, it remains a fundamental requirement that all communications (including financial promotions) are clear, fair and not misleading and that firms act to deliver good outcomes for customers. This is furthermore underpinned by the Consumer Duty Customer Understanding outcome (Section H.4.6).
The Consumer Duty came into force on 31st July 2023 for products and services that are on sale to new customers or available for renewal to existing customers. It applies to closed book products from 31st July 2024. Firms should note that the new standards under Principle 12 and PRIN 2A, including the cross-cutting rules, apply to communications and financial promotions on social media.
This applies whether the firm has a direct relationship with the customer or not, including where a firm approves a financial promotion. Firms advertising using social media must consider how their marketing strategies align with acting to deliver good outcomes for retail customers. All the cross-cutting rules will be relevant to social media promotions, and firms should take into account how promotions that do not support consumer understanding may cause consumers to buy products that are unsuitable for them, leading to foreseeable harm.
The FCA’s basic expectations under Principle 7, requiring all communications (including financial promotions) to be clear, fair and not misleading, remain but compliance with these by themselves will not be sufficient to ensure compliance with the Duty.
Firms’ communications should support and enable informed decision-making, equipping consumers with the right information in a timely way. Firms must also consider how they tailor communications to account, for example, for the likely audience on social media and the features of different platforms.
FG22/5 outlines examples of good and poor practice under the Duty that firms can refer to, and we have summarised the Consumer Understanding requirements of the Consumer Duty in Section H.4 of this manual.
Social Media Guidance
The FCA originally produced guidance for firms in September 2011 and subsequently published FG15/4: Social Media and Customer Communications in March 2015 setting out their expectations on prominence and providing examples of good and poor practice.
In July 2023 the FCA announced that it would be modernising social media guidance and taking action against those firms that do not meet its expectations in this area. This includes increasing its scrutiny of on-line financial promotions. GC23/2 contains the guidance consultation along with examples of compliant and non-compliant promotions.
The FCA has stated that it has seen consumers on social media be repeatedly bombarded by financial promotions from the same service or firm and that vulnerable consumers may be more susceptible on social media to the type of behavioural biases that excessive targeting tries to exploit (which fails to meet the cross-cutting rule to act in good faith).
Firms should consider whether their marketing strategies are consistent with enabling good consumer decision making as promotions that fail to deliver good customer outcomes pose the risk that consumers buy the wrong product – ultimately with unhappy outcomes for them and for firm.
How this may affect you
The FCA recognises that social media are particularly powerful channels of communication both pre and post-sale, and therefore of significant value to firms. The FCA does not want to prevent their use, but the FCA does recognise that, due to the specific characteristics of communicating on social media, there is a risk of consumer harm when advertising practices fall short of the guidance that has been put in place.
Stand Alone Compliance
The FCA expects financial promotions to be standalone compliant. This means that each stage of a financial promotion must comply with FCA rules, and that a promotion must be able to ‘stand on its own two feet’ and not rely on information visible elsewhere to achieve compliance. However, promotions of complex financial products might require additional supporting information or disclosure to enable consumer understanding. In this case, firms may include supporting hyperlinks or separate pathways for a consumer to access this. Links to additional information should be clearly and prominently brought to the consumer’s attention and should give consumers enough information to make an informed decision.
Further guidance on how to effectively tailor communications including through layering can be found in Section H.4.6.1 of the manual.
When assessing the compliance of a promotion that is viewed via a dynamic medium (such as Instagram stories), the FCA assesses the promotion as a whole. It takes a proportionate view based on the number of frames, and on where information about risk is displayed within the promotion. To meet its expectations regarding prominence, firms should aim to display the key information about risk upon a consumer’s first interaction with the promotion and the warning should be displayed for a sustained period.
Firms should consider whether certain products are suitable for promotion on social media. For example, CONC 3.9.2G provides guidance that, in light of the complexity of debt counselling, it is unlikely that media which provide restricted space for messages would be a suitable means of communicating financial promotions about debt solutions.
Social Media communications are often space limited; a number of media may impose character limits, or other space or time limitations. These include Twitter (140 characters) and Vine (maximum six-second video loops). Adverts on Facebook have 25 characters for the headline and 90 characters for the body text (although status updates are effectively unlimited). Pinterest is limited to 500 characters. An SMS text message, which could be business-related or purely social, has a limit of 160 characters. This in itself poses a challenge for firms when considering how they provide a suitable amount of information.
Communications through social media can also reach a wide audience very rapidly and it can be more difficult to control the audience which a financial promotion can reach. Firms should take account of this in their decision to promote through social media and their ability to do so safely for the firm and its customers, some considerations for firms are outlined below:
- The promotion should be clearly Identified as a financial promotion; this may be by labelling it as such or ensuring it is clear from the context.
- Firms should ensure that their original communication will remain clear, fair and not misleading, even if it ends up in front of a non-intended recipient (e.g., through others retweeting on Twitter or sharing on Facebook). Firms may manage this risk by clear labelling and by the use of software that enables advertisers to target particular groups very precisely.
- The requirements to be fair and not misleading imply balance in how financial products and services are promoted, so that consumers should have an appreciation not only of the potential benefits but also any relevant risk warnings with equal prominence.
- In deciding whether a particular statement meets the rules on prominence, consideration should be given to the characteristics of the target audience, the nature of the product or service and the likely information needs of the average recipient.
- Firms should avoiding disguising prominent risk information in smaller text, truncated text or ‘click-throughs’. (Where a click-through is required to fully explain the risk the nature of the risk should still be evident on the face of the promotion).
- Any statements made regarding performance indicators of the product or company should be based on the immediate past five years performance and be capable of being substantiated/evidenced.
- Firms should consider the appropriateness of character-limited media as a means of promoting complex features of financial products or services. It may be possible to signpost a product or service with a link to more comprehensive information, provided that the promotion remains compliant in itself.
- Ensuring where links are used that these are not unknowingly directing customers to non-UK entities which do not afford the protection of UK regulation.
- Alternatively, it may be more appropriate to use ‘image advertising’ to promote a firm more generally.
Firms are reminded that there are sector-specific requirements in relation to prominence in the relevant sourcebooks. Each communication (e.g., a tweet, a Facebook insertion or page, or web page) needs to be considered individually and comply with the relevant rules as follows:
|Insurance: Conduct of Business sourcebook
|Consumer Credit sourcebook
|Funeral Plan: Conduct of Business sourcebook
|Claims Management: Conduct of Business sourcebook
Page 19 of GC23/2 includes a useful table which sets out the FCA application of prominence standards to various social media channels.
Approval and Testing
We remind firms of their obligations to have an adequate systems and controls in place to sign off digital media communications. This sign-off should be by a person of appropriate competence and seniority within the organisation.
Firms should also keep adequate records of any significant communications. As well as helping to protect consumers, these records enable the firm to deal effectively with any subsequent claims or complaints.
Firms should not rely on digital media channels to maintain records, as they will not have control over this: social media in particular may refresh content from time to time, with the consequent deletion of older material.
Targeted consumer testing is an avenue that should be explored to assist with firms’ assessments in this area, more information on how firms may test communications can be found in Section H.4.6.
Advertisers are also required to adhere to the Committee of Advertising Practice (CAP) Code, which applies to ‘non-technical’ elements of financial advertising, for example matters of social responsibility, harm and offence.
Firms that are considering sending marketing through electronic media should be aware of specific legal requirements that they must comply with when doing so. Firms should be aware of the Privacy and Electronic Communications Regulations 2003 (PECR) and the Information Commissioner’s Office Direct Marketing guidance and any other specific requirements within the relevant conduct of business sourcebooks.
Interacting with Influencers and Social Media Platforms
The FCA has seen harm occurring from influencers communicating financial promotions both in the authorised space (where promotions have been approved by an authorised person) and unauthorised space (where promotions have been communicated illegally).
The influencer market is growing and varied; some influencers have direct relationships with firms and others promote on their own initiative. We have broken down the influencer market and the commercial incentives behind each group with a view to offering guidance on how the financial promotion restriction might apply to the different models in the market.
- First, there are celebrity influencers who are not associated with financial services but have large follower groups. These influencers are not financial experts but may be compensated for using their digital presence to promote companies that have a business interest in persuading people to make certain financial decisions.
- Second, there are financial influencers known as ‘finfluencers’ who may not be authorised by the FCA to provide financial advice yet share their opinions and recommendations on digital platforms. Consumers exhibit high levels of trust in finfluencers, but their advice can often be misleading.
- Third, there are forums and discussion groups on financial topics that function as spaces in which individuals exchange information and share knowledge. These forums can be both public (such as Reddit) or private (such as Telegram). Sometimes these groups are set up to encourage participants to register for a specific course or are used by participants to encourage others to engage in personal chats outside the platform where they sell financial advice or financial products.
All segments of the influencer market are capable of communicating a financial promotion, and whether a communication falls within regulatory scope is not based on the size of an influencer’s following. The FCA has partnered with the Advertising Standards Authority (ASA) to create an infographic, which is designed to help influencers when they are approached with the opportunity to promote a financial product or service. This infographic encourages influencers to consider whether they are the right person to promote a product or service as well as highlighting when they may be at risk of communicating financial promotions illegally.
Social media platforms
The Government’s Online Safety Bill (OSB), once passed, will place duties on search engines and social media sites to put in place proportionate systems and processes to mitigate the risks to users posed by the presence and dissemination of illegal content on their sites, including illegal financial promotions. This new regime will be overseen by Ofcom, which has worked closely with the FCA to create a shared understanding of how platforms’ obligations under the OSB will interact with financial promotion legislation.
Firms and influencers using social media to communicate financial promotions should be aware of the social media platforms’ own policies relating to advertising on their platforms. There may be additional requirements or restrictions beyond what is set out in this guidance. Firms and influencers should make sure to check a social media platform’s own policy before using it to promote.
Unauthorised influencers who are communicating financial promotions without S.21 approval from an authorised person are likely to be communicating an illegal financial promotion unless the promotion falls within an exemption under the Financial Promotions Order. Firms approving the financial promotions of influencers should pay particular consideration to the influencer’s audience demographics and whether they are likely to have an audience demonstrating characteristics of vulnerability. For example, it would be inappropriate for investment firms to work with influencers whose content centres around tips on how to quickly get out of debt, without regard for the nature of the influencer’s audience.