Out-Law News | 13 Mar 2015 | 3:50 pm | 3 min. read
The regulator has issued new guidance for financial services firms on how to use social media in a way that complies with financial services regulations (20-page / 1.24MB PDF). It said that regulated businesses are not prohibited from sharing or forwarding others' communications on social media platforms but that they will be held responsible for ensuring those communications comply with its rules in some circumstances.
"If a firm retweets a customer’s tweet, whether or not it is a financial promotion will depend on the content of the tweet," the FCA said. "For example, a tweet expressing satisfaction with considerate service received from the firm will not be a promotion, as good customer service is not itself a controlled activity (it concerns the way in which the activity is carried on, not the activity as such)."
"However, if the customer’s tweet comments on or endorses the benefits of a regulated financial product or service, then sharing or forwarding by the firm will constitute a promotion by the firm. The firm is responsible if it communicates the retweet, even though the firm did not generate the original content of the communication," it said.
The FCA said that financial services companies must ensure that all social media communications are clear, fair and not misleading. They must put "an adequate system in place" to ensure messages intended for social media channels are signed off by a sufficiently senior member of staff. It also said the businesses need to keep their own records of "any significant communications" they make on social media and not rely on the records kept by the social media platforms.
"The current sign-off and record-keeping provisions in the relevant chapters of the conduct of business sourcebooks in our Handbook apply to digital (including specifically social) media in the same way as to print, broadcast and outdoor media," the FCA said. "Beyond that, these matters are a question of risk management by the firm. We refer firms to the provisions in our Senior Management Arrangements, Systems and Controls manual … Risk management encompasses all relevant risks, including legal and reputational risk, as well as regulatory risk."
The FCA's reference to the need for senior manager sign-off for financial promotions is also indicative of the regulator's intention to "hold individuals increasingly accountable if failings occur based upon clear documentation exhibiting their role in the decision making process”, financial services litigation and compliance expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said.
"Whilst the FCA’s guidance on financial promotions in social media reiterates the need for regulated firms to ensure any such communications are clear, fair and not misleading it may be considered to extend the definition of a financial promotion beyond that previously identified by those in the regulated industry," Ruck said. "It is certainly a clear message from the FCA that it will be interpreting its remit extremely widely when it comes to the interpretation of what amounts to a financial promotion and taking action against firms who fail to take note of this guidance. It has already announced that it has implemented its early intervention powers in relation to financial promotions."
In its guidance, the FCA said financial services companies can use 'infographics' to convey necessary risk warnings alongside other information about financial products and services they are promoting to overcome limitations in the number of characters they can use when using social media channels such as Twitter.
The regulator said that financial services companies need to be aware of technical constraints that can render their social media communications non-compliant.
"One possible solution to the problem of character limitation is to insert images, including the use of infographics, into communications such as tweets, which allows relatively unrestricted information to be conveyed," the FCA said. "Clearly, the image must in itself be compliant. However, we are aware that the functionality that allows a Twitter image to be permanently visible, may be switched off so that the image appears simply as a link. Therefore, where the financial promotion triggers a risk warning or other information required by our rules, this cannot appear solely in the image."
Ruck said financial services must now consider whether using character limited social media "is a suitable method of communicating with potential customers" and that they might need to "utilise developing technologies to target specific categories of individuals to ensure individuals do not receive inappropriate communications".
"Firms must very carefully consider any use of social media and the relevant regulatory requirements to ensure they do not fall foul of the FCA’s developing approach," Ruck said.