Social Media Financial Promotions Reviewed

Essential Update on Financial Promotions via Social Media

The Financial Conduct Authority’s (FCA) rules fully apply to financial promotions / communications made on social media. With firms increasingly leveraging platforms like Instagram, Discord, and Telegram, adhering to regulations is critical. Key areas of concern include ensuring standalone compliance, clear risk warnings, avoiding unauthorised endorsements, and the global reach of these promotions.

Objectivus stands ready to guide firms through the FCA’s latest financial promotion requirements, ensuring a thorough understanding and seamless integration into existing marketing strategies. We are equipped to assist in developing and refining policies that not only comply with the new regulations but also enhance consumer trust and market integrity by also focusing on The Consumer Duty requirements. If you require assistance or clarity, please contact us.

The FCA has updated its guidance to reflect the nuances of social media and the higher standards expected under the Consumer Duty. The new guidance replaces the 2015 version FG14/4 and provides clear examples of good conduct, emphasising the need for fair, clear, and non-misleading communications that support consumer understanding.

Considerations for Firms

To comply with the FCA’s guidance and rules firms must:

• Ensure promotions are clear and provide a balanced view.
• Consider the suitability of social media for complex product details.
• Make risk warnings prominent and comprehensive.
• Align social media strategies with the Consumer Duty, focusing on consumer understanding.
• Manage the risks of shared content, maintaining responsibility for compliance.
• Implement effective controls for affiliate marketing to ensure alignment with financial promotion rules.

Compliance in Social Media Advertising

Promotions must be independently (i.e. standalone) compliant, presenting a balanced view and not mislead consumers. Risk warnings should be prominent, not hidden behind links or ‘see more’ prompts providing a balanced view of both risk and benefits. The FCA also stresses the importance of approved content, especially when involving influencers, and the correct portrayal of affiliate marketing, ensuring it aligns with regulations.

Implications for Non-UK Firms

The UK’s financial promotion rules extend to any communication that can affect the UK market, regardless of the communicator’s location. Non-UK firms must therefore either restrict their promotions from UK consumers, ensure they are approved by UK authorised firms, or adjust their content to avoid inducements.

Specific Requirements

One focal point the FCA stresses is on specific guidelines on promoting high-risk investments on social media. Some of the essential aspects include:

• Promotion restrictions: Certain high-risk investments, like non-mainstream pooled investments and speculative illiquid securities (e.g., speculative “mini bonds”), are prohibited from being mass-marketed to retail investors. Firms must ensure that such promotions do not reach or are not accessible to retail investors on social media.
• Compliance with prescribed risk warnings: Prescribed risk warnings must be displayed throughout the promotion and should not be obscured or truncated by any design features of the social media platform. These warnings need to be clear and easily understandable, providing consumers with essential information about the risks associated with the investment.
• Requirements for specific high-Risk investments: Investments such as crowdfunding, cryptoassets, and contracts for differences (CFDs) can be mass-marketed but are subject to strict regulatory restrictions. These include detailed risk warnings and prohibitions on incentives to invest.
• Clear and prominent risk information: Risk information must be presented prominently to ensure it is not overlooked by potential investors. This includes using a font size and placement that makes the warnings noticeable relative to other elements of the promotion.