The FSA has issued a warning to companies using social media, saying they “often fall foul” of the financial promotions rules and will face regulatory action.
Speaking at the Tax Incentivised Savings Association annual conference in London this week, FSA head of asset management Ed Harley said the rules apply to all media.
He said: “Our rules on financial promotions are neutral as to the type of media used. Firms who use social media often fall foul of the rules and it is because they do not realise that what they are tweeting, for example, is an inducement or can be an inducement to invest or engage in financial services.
“For instance, we recently had a mortgage broker who was tweeting about a particular mortgage product without including the appropriate risk warnings to be compliant. We spoke to the broker and it was withdrawn. Just think about that when using social media.”
The Financial Conduct Authority will have stronger powers to ban adverts and financial promotions and publicise wrongdoers.
In a TISA debate on the use of social media, Old Mutual strategic marketing director Carlton Hood said it is “imperative” firms engage with social media despite the risks.
He said: “There are reasons that firms find it difficult to engage with social media but it is absolutely imperative that we do.
“In financial services we are very afraid of stepping into something new and like to hide behind our marketing and compliance teams and the regulators. Social media exposes us to a world with greater risk than we are comfortable with so we fight shy. But the future of communicating is through social media so you have to find a way to master it.”