FCA Publishes Finalised Guidance on Financial Promotions on Social Media

The Financial Conduct Authority (“FCA”) has published its finalised guidance on financial promotions on social media (FG24/1) (the “Guidance”). This follows a consultation carried out by the FCA in July 2023 and replaces previous guidance (FG15/4). The Guidance clarifies the FCA’s regulatory expectations for firms and others, including influencers, regarding compliance with the UK’s financial promotions regime. Additionally, it explains how communications on social media might fall within the scope of the financial promotions regime and how the rules will function when applied.

Who Does This Impact?

The Guidance applies to:

• authorised persons communicating or approving financial promotions on social media;
• unauthorised persons, including influencers or other affiliate marketers, involved in communicating financial promotions on social media; and
• trade bodies representing the above groups.

Activities which Constitute Financial Promotions on Social Media

Under Section 21 of the Financial Services and Markets Act 2000 (“FSMA”), people are generally restricted from, in the course of business, communicating an invitation or inducement to engage in “financial promotions”.

In the context of social media, the Guidance clarifies that a communication made “in the course of business” encompasses any direct or indirect commercial interest. Beyond communications from the firm itself, this includes influencers who:

• are directly compensated by a firm, a firm’s affiliate and/or a social media platform for promoting a firm’s services (and/or for the views such promotion attracts);
• promote a firm’s services on a social media platform with a view to future profit, such as a future relationship with a firm or growing their presence for stronger commercial leverage; and
• promote chatrooms which promote investment products, or vice versa, should they have a commercial interest in the chatroom or benefit from the investment products sold.

The Guidance emphasises that the restriction also applies to communications originating from outside the UK if it has an effect in the UK. The FCA considers it appropriate that unauthorised entities (overseas or otherwise) should undertake risk management such as having an authorised person approve their financial promotions, creating a separate UK social media account and/or using geo tools to prevent UK consumers from accessing their promotions and/or products. Group entities containing authorised and unauthorised entities and which operate common social media platforms should be particularly careful about how UK consumers interact with their content.

Rules Governing Financial Promotions on Social Media

The FCA expects each financial promotion to be compliant with the financial promotions rules on a standalone basis.

Financial promotions must present a balanced view of the benefits and risks of the promoted product or service and furnish consumers with an appropriate level of detail – the standard of which varies depending on factors such as the firm’s target audience, the information consumers require, the decision consumers are to make, and any potential sources of confusion.

The FCA has identified a number of key points firms should have in mind when thinking of using a social media channel:

Suitability of social media for financial promotions: Social media will not always be a suitable platform for financial promotions. Firms need to consider if they can provide an appropriate level of detail to present a clear and balanced view, despite content restrictions on length or character limits.  Certain products are unlikely to be suitable for marketing via social media.

High‑risk investments (HRIs): Investments classified as HRIs still need to comply with any wider rules that apply to their financial promotions (for example, mandatory risk warnings, prohibitions on incentives to invest) – the fact that the marketing channel is a social media platform will not change this.

Prominence: Warnings should be appropriately prominent. Text should not be truncated, and warnings must not sit outside the main body of the financial promotion. Firms are also discouraged from obscuring warnings or further important information behind links – placing any mandatory content behind a link is likely to result in the financial promotion being deemed non-compliant.

Marketing Strategies

Firms are reminded of their obligations under the Consumer Duty (the “Duty”). Firms must consider how their social media marketing strategies deliver good outcomes for retail customers. Financial promotions must support and enable informed decision‑making, providing the right information at the right time.

The Duty requires firms to identify a target market and tailor their communications accordingly, ensuring an appropriate level of understanding and carrying out regular consumer testing. Firms will need to consider if financial promotions can be confined to restricted target markets - something the FCA notes can be more difficult in a social media context where there is limited control over distribution.

The FCA also raised concerns about consumers being repeatedly bombarded by financial promotions. Vulnerable consumers are susceptible to exploitation by excessive contact, which is prohibited under the Duty – putting firms on notice as to how they use social media optimising tools to bring their promotions to the fore.

Lastly, the ease of sharing materials over social media is also commented on. The FCA has reminded firms that:

1. any breaches of the rules in the original financial promotion remain the responsibility of the originating firm – the fact a communication was shared will not cure pre-existing non-compliance; and
2. firms may be responsible for compliance if they share a post from third parties, as this could amount to the firm being seen to make its own invitation or inducement.

Caution should therefore be exercised in seeking to leverage ‘viral’ marketing as a financial promotion distribution strategy.

Affiliates and Influencers

Firms using affiliates, such as influencers, to communicate financial promotions on social media must ensure that they understand the marketed product, the regulatory requirements and are appropriately approved, authorised and monitored. When approving such financial promotions, firms must consider an influencer’s audience demographic, particularly any audience vulnerabilities and assess if it remains appropriate to approve the financial promotion.

Though a firm which approves a promotion would not necessarily be responsible if its contents are changed by an unauthorised entity and communicated without permission, if the firm is concerned that an affiliate may alter their approved promotions or communicate unapproved promotions, they should consider whether it is appropriate to maintain their relationship with that affiliate.

Affiliates should also be aware of the wider regulations on advertising online set out by the Advertising Standard Authority (the “ASA”). The FCA and ASA have partnered to provide infographics to help influencers understand financial promotions.

Co-authored by Darren Tan.