Labour says the FCA is at risk of falling behind advances in social media because it has taken four years to update its financial promotions rules for websites such as Twitter or Facebook.
The regulator’s Conduct of Business Sourcebook sets out rules for how media of all types can be used for financial promotions; these include the requirement for any communication to be “fair, clear and not misleading”.
In 2010, the regulator published guidance on applying the rules to social media such as Twitter or Facebook. The FCA plans to publish an updated version of the guidance later this summer.
Last week, shadow Treasury financial secretary Cathy Jamieson told Money Marketing the guidance should be updated regularly and the regulator’s revision must take into account “constantly evolving” social media.
She said: “The social media landscape is constantly evolving and guidance on how these platforms are used to promote financial services should be updated regularly, and certainly more often than every four years.
“Media such as Twitter and Facebook encourage people to make snap decisions and we must ensure that appropriate safeguards are in place to protect consumers and businesses.
“Things have moved on considerably since 2010 and any new guidelines must take this into account.”
But independent compliance consultant Adam Samuel says updating the guidance would be a “waste of the regulator’s time” because the key rules are set out by Europe.
He says: “For investment products, the FCA is tied by European regulations to the core Cobs rules. These require balance in promotions and the disclosure of the relevant risks. This rules out using Twitter and most other new media for all but image advertising.
“Any liberalisation of the rules would require European Commission approval, which frankly should not be granted.
“The reality is the regulator is not very good at enforcing its existing rules in the old media area. A viewing of daytime TV and the ghastly adverts for over-50s life assurance suggest the FCA ought to concentrate on enforcing its existing rules before producing more updated guidelines.”
An FCA spokeswoman says: “Social media is not exempt from the financial promotion requirements.
“When firms are putting together financial promotions for social media, they should consider exactly the same rules as they would for print promotions. We are currently working on updating our social media guidance and will publish it later this year.”
Wingate Financial Planning director Alistair Cunningham says: “I am with the FCA on this; the guidance is clear. The same rules apply to social media as to all other media. Firms cannot meet the rules on financial promotions on social media.”
Jacksons Wealth Management managing director Pete Matthew says: “The rules should and do apply to all media and if you have any common sense it is quite difficult to fall foul of them. The media you choose is about form but these rules are about content and content must obey the rules whatever the form.
“The rules do not need to change but some examples of what is and is not acceptable would be helpful.”
Rules on using media for financial promotions
- A firm must ensure a communication or promotion is not misleading
- A firm must ensure information is presented in a way that is likely to be understood by an average member of the group to whom it is directed or by whom it is likely to be received
- A firm must ensure a financial promotion addressed to a client is clearly identifiable as such
- A firm must ensure information does not emphasise any potential benefits of relevant business or relevant investments without also giving a fair and prominent indication of any relevant risks
- A firm must ensure information that contains an indication of past performance of relevant business, a relevant investment or a financial index includes a prominent warning that the figures relate to the past and are not a reliable indicator of future results
- As firms were warned in May 2012, the rules apply also to using social media to promote award wins judged on both service and past performance.