The recent comments made by FCA chief executive Martin Wheatley about using Twitter and other social networks to spot illegal activity comes at an interesting time for a sector that has only recently began to make use of social media. But what will Wheatley’s comments actually mean in practice for the 26,000 companies that fall under his remit?
There are two obvious areas that Wheatley and the FCA will monitor social networks for: illegal promotional activity and wider market trends.
First, I expect the FCA to increase its focus on what they term ‘digital promotions’ by financial firms, this was highlighted by the regulator last year as an area of concern. In the eyes of the regulator, digital promotions are any activity that is perceived as an inducement to engage in financial activity. The digital element covers social networks, creative banner ads, and mobile applications.
In the past the FSA noticed that there had been some firms that failed to provide appropriate warnings around these channels. Essentially, risk warnings and other important information were often deemed to be lacking, meaning it wasn’t seen as fair and clear, but rather misleading. The other interesting aspect, given the importance of images to social media, is that firms need to appreciate that content on social networks is not the same as image advertising, which would be exempt from financial promotion rules.
What we can expect is the FCA to be pre-emptive by naming, shaming and banning activity which falls foul of their rules. This approach may help set the boundaries of what is allowed by the industry, but I am concerned that such a hard-line approach stifles creativity and stops business engaging with customers online. The financial sector is repeatedly told that it is out of touch with its customers, and social media actually provides the sector with a direct channel of conversation and a means to ‘treat them fairly’, by engaging with them online. Smart businesses do not try and sell or push products through social media, they realise that it is about building relationships involving a two-way conversation, not just pushing content and promotions. It’ll be interesting to see if the FCA’s strict approach discourages innovation in this area.
What does interest and excite me is that I expect the FCA, like many savvy organisations, to start tapping into the wealth of data and market trends that can be derived from social media. This data is already being used by the likes of HM Treasury and The Red Cross to provide their organisations with information and analysis on a host of different issues.
By using social media monitoring tools the regulator could spot changes in trends around products, brands and complaints. This data can act as an early warning system to potential bubbles developing in the retail sector that the FCA should pay closer attention to.
Wheatley’s comments last week were a solid sound bite to demonstrate that the FCA will not leave any stone unturned in protecting consumers effectively. However, monitoring social media is not a case of having an intern watching a Twitter feed all day. The FCA will have to tool up and invest in time and training to effectively monitor social networks. Arguably, the biggest challenge may well be the FCA fully appreciating that social media has changed companies do business and with that how you regulate them.
Chris Jackson is head of digital at Cicero Group