Regulation, regulation, regulation. It can sometimes feel like we in the financial services are inundated by changes to regulation. But as increasing numbers of asset managers choose to communicate with clients and prospects via blogs, LinkedIn and Twitter, it is important that this industry keeps a keen eye on what is expected off of them in regards to the regulation around social media.
Thankfully, albeit a little later than most in the industry were hoping for, the Financial Conduct Authority (FCA) has made good progress towards defining the regulation more clearly. The finalised guide ‘The FCAs supervisory approach to financial promotions in social media’, was published in March this year with the aim of clearing up the confusion around communicating online.
But despite the regulator providing some guidance on the matter, some asset managers are left in the dark when it comes to how to go about toeing the line. We run through the key rules and what to watch out for when looking at using social media for promotional content.
Clear, fair and not misleading
These should be considered the foundations for being compliant, and are about being balanced in all your promotions. Essentially, financial promotions on social media must contain warnings so everyone understands the risks associated with your products or services.
For example, if you are promoting a fund’s performance then you must make it clear that past performance is not a guarantee of future returns.
While this sounds simple enough, there are many areas of previous regulation that have caused concern or confusion. These include questions over what type of communications fall inside the FCA’s remit as well as sharing on social media, hashtags and character limits.
But, what is a financial promotion?
This may seem obvious but if your firm’s communication invites or induces people to engage in financial activity then you are definitely in financial promotion territory – and you need to make sure these types of communications comply with the regulation to avoid falling foul of the regulator.
The FCA’s rules do not just apply to the company social media accounts. If you are using your personal social media account but you are widely associated with your firm, take care to make sure all commercial communications from your account, or ones that could be interpreted as such, are compliant too. Otherwise you could find yourself in hot water.
Sharing for forwarding communications
One of the key areas for concern on social media is the lack of control you have over your content once it’s posted.
However, the FCA is very clear that when your content is forwarded or shared, the responsibility lies with the communicator. This means that your firm is not responsible for someone else forwarding your content and that the responsibility lies with them.
Remember – breaches in the original content are still your responsibility!
If your firm retweets a customer’s tweet which endorses a regulated service or product then this is a promotion by your firm and it is within the FCA’s remit to take action.
With regards to Twitter, initially the FCA suggested that firms should mark financial promotions by using #Ad, so that customers can distinguish promotional content from non-promotional content.
After considering its original guidelines and feedback from the industry, the FCA has decided not to enforce using the #ad rule. It was decided that most financial promotions are obvious anyway and also that this was an inappropriate use of the hashtag functionality.
The FCA makes it clear that it does not believe hashtags are appropriate in financial content on social media. This is because complex content may end up in front of someone who was not searching for it – which paves the way for confusion – exactly what we want to avoid!
These guidelines seem to be based around Twitter and it is made clear that the 140 character limit is not an excuse for non-compliance. Firms are warned of the appropriateness of character limited media as a means of promoting complex products or services.
If you do decide to go down this route, then using graphics, links or videos in your promotions is one way to get around the word limits and include the necessary warnings and information in your promotions.
The FCA’s guidance has been widely welcomed by the industry as it clears up some areas of confusion when it comes what we can and can’t do on social media. It is seen as a positive step for the industry towards acknowledging the importance of the digital space and recognising that the way we are communicating is evolving.