Background

On 26^th March, the Financial Conduct Authority ("FCA") published the finalised guidance on financial promotions on social media ("Guidance"). Directed at businesses and influencers utilising digital channels to make financial promotions, the Guidance aims to increase regulatory awareness amidst rising use of social media to advertise financial products and services, and consumers' reliance on short-form content. Whilst the Guidance replaces its predecessor (FG15/4) and does not create new rules, it indicates how businesses and influencers may approach complying with their existing requirements. 

Financial promotions on social media

Financial promotion restriction ("FPR")

The FPR under s21 of the Financial Services and Markets Act 2000 (FSMA) makes it a criminal offence punishable by up to 2 years' imprisonment if a person, "in the course of business, communicates an invitation or inducement to engage in investment activity" unless:

• the promotion is communicated by an "authorised person";
• the content of the promotion is approved by an "appropriate authorised person"; or, 
• a statutory exemption applies. 

The FPR's reach extends to foreign bodies if their communication is capable of having an impact in the UK.  Importantly for influencers, "engaging in investment activity" is interpreted broadly and includes a wide range of financial services and products. 

Financial promotion rules

Generally, financial promotions are required to support consumer understanding and to be fair, clear and not misleading. This is particularly applicable in the context of social media, as firms are expected to ensure that their communications retain their original, clear message, even if it ends up shared to a non-intended recipient. The Guidance lists the specific sector rules applicable to financial promotions that can be found in the FCA Handbook, such as those applicable to insurance or mortgages, with a particular focus on cryptoassets; underlying the heightened requirements around financial promotions in this area which is of particular concern for the FCA. 

Balance and prominence

Financial promotions must be balanced with an appropriate level of detail. This will be based on the target audience, what they need to know, their decision to make and any other potential sources of confusion. The FCA included the following useful graphics in the Guidance illustrating balance in a social media promotion:

Whether information communicated in a social media promotion will be considered to be sufficiently prominent will depend on its size, position, or emphasis within a promotion. This will, of course, differ based on the social media platform. The Guidance encourages firms to avoid including excessive information so as to assist consumer understanding, whilst displaying all crucial detail without needing to click-through or take any further action.

Risk warnings

The Guideline reminds stakeholders that risk warnings should be "clear to consumers on the face of the promotion" and provides a range of examples. Stakeholders must ensure that these risk warnings are clear and do not require click-through to access. In practical terms, these should take place within the central part of the social media content, rather than as an underlying caption. The following table from the FCA Guidance indicates the expectations in relation to risk warnings across various different types of social media:

Marketing strategies

Marketers making financial promotions on social media must: 

• Consider whether their strategies align with delivering good outcomes to consumers;
• Identify target market and tailor communications to them and the characteristics of the social media platform; 
• Consider whether social media is the right platform (e.g. if a promotion is designed only for a professional target market) 

Interestingly, sharing of promotional content by a third party does not discharge the firm from any non-compliance. On the other hand, if a firm shares a customer's social media post that amounts to an invitation or inducement engage in investment activity, the firm assumes responsibility for compliance, despite not being the original creator. 

Affiliate marketing 

Affiliate marketing involves a firm agreeing to pay commission to a person based on business generated from referrals.

The Guidance states that when an affiliate influencer communicates a financial promotion that includes a firm's referral link, the FCA will consider this as a communication made by the firm, even if the firm has no creative or editorial control over the content. 

Firms are also reminded about their responsibility to take appropriate steps to make sure that influencers understand the products or services promoted, as well as relevant regulatory requirements. This includes effective monitoring practices, particularly as influencers are likely to be unregulated entities for the purposes of FPR. The FCA included the following useful table in the Guidance illustrating good and poor practice for monitoring and oversight of affiliate marketers.

Influencers and social media platforms

Influencers, policies and approvals

The Guidance lists three "types" of influencers:

• Celebrity influencers – those not associated with financial services, but compensated for using their digital presence to promote companies (see our earlier post here), and;
• "Finfluencers" – financial influencers who share their opinions and recommendations on social media despite most likely not being FCA-regulated.
• Forums and discussion groups – on financial topics, which may be public or private, and may be used as a step in a chain to sell financial advice or products.

The FCA emphasises the interplay with other policies, specifically referring to Advertising Standards Authority's ("ASA") update on influencer advertising, guidance on buy now-pay later services,  and the CAP Code. Further, the FCA reminds influencers about the Market Abuse Regulation and the requirements when producing or providing investment recommendations to present information objectively and declare any conflicts of interest. 

Firms approving financial promotion campaigns must consider an influencer's demographics, including whether they are likely to have an audience with characteristics of vulnerability. The FCA also highlights strengthened requirements for financial promotions concerning investment-related financial products, such as high-risk investments. 

"In the course of business"

According to the Guidance, the "in the course of business" threshold for FPR purposes is very low. An influencer may be found on the wrong side of the law by virtue of their commercial nature by, for example, communicating a financial promotion alongside other content. In practical terms, this may mean that a repost or a retweet without a commercial relationship with a brand, may be considered to be made "in the course of business." 

Finally, promoters and influencers alike should be particularly mindful that FPR rules apply to all types of social media channels, whether private, public or invitation only. This also extends to memes, which have become a very popular marketing tool, particularly in the cryptoassets sector. 

Take home

The FCA has been, and clearly continues to be, concerned about financial promotions on social media given that they reach mass audiences with increasing speed and frequency with the potential for significant consumer harm where those financial promotions are of poor quality i.e. non-compliant with the Guidance.  The Guidance reflects the current state and use of social media, which has moved on in the 9 years since the FCA published its previous guidance on the use of social media, as well as the introduction of the consumer duty. 

Firms, influencers and finfluencers alike would be well advised to be mindful of the Guidance – despite the challenges presented by limited screen space and volume of content consumed daily - when preparing financial promotions for social media, as the FCA may seek to have non-compliant financial promotions taken down, and there could be further consequences, including fines for those responsible for such promotions.  In 2023 the FCA had 10,008 authorised firm financial promotions amended or withdrawn, and for unauthorised firms and individuals the FCA issued 2285 alerts.  The 2023 figures represent a significant increase on the figures for 2022, and the FCA is expected to continue its focus on financial promotions in 2024.