Promotions for financial products must be identifiable as such, the regulator states, and, for character-limited media, it suggests the use of #ad.
It is consulting on its expectations and wants feedback from firms by November.
In a guidance consultation paper published today, the FCA reinforced the position that its financial promotion rules are intended to be “media-neutral” and guided by the “overarching principle that any communication should be fair, clear and not misleading”, while alerting consumers to relevant risks.
The FCA wants feedback on its requirements in four specific areas: promotions for products; stand-alone compliance; risk warnings and other required statements; and image advertising.
It said it recognises social media are “particularly powerful” channels of communication that are of “significant value” to firms and therefore does not want to prevent their use.
However, it warned promotions of products need to be “identifiable as such”, for example by adding #ad in online posts on character limited media such as Twitter.
It also warned that each communication, such as a single tweet, needs to be considered individually to comply with the relevant rules.
Furthermore, it reminded firms certain products, when promoted, need to include risk warnings or other statements.
This poses particular challenges for the use of character-limited social media, it warned, while suggesting inserting images, such as infographics into tweets, can be a useful tool to stay compliant.
“However, where the financial promotion triggers a risk warning or other information required by our rules this cannot appear solely in the image,” it added.
The FCA also reminded firms that it remains possible to advertise their presence in the market through ‘image advertising’ “in a way which is unlikely to present difficulties with character limits”.
Director of supervision Clive Adamson said: “The FCA sees positive benefits from using social media but there has to be an element of compliance. Primarily, what firms do on social media must ensure customers are at the heart of their business.
“Our overall approach is that financial promotions, whether on social media or traditional media, should be fair, clear and not misleading. We have had extensive industry engagement on this issue and we believe our guidance is a sensible approach that doesn’t affect industry’s ability to innovate using new forms of media.
“We recognise social media are constantly evolving. We, therefore, welcome feedback to today’s consultation and look forward to continuing the discussion with industry.”
The last time the regulator issued guidelines on how firms are allowed to promote their services on social media was in June 2010 when the Financial Services Authority (FSA) issued an update following its review into “media channels that firms use to communicate financial promotions to customers”.
The regulator at the time had reviewed 30 Twitter and Facebook pages of a variety of firms, including advisers, using different search terms within the financial sector.
The brief letter at the time said that firms need to treat social media in the same way they would all other channels of communication, although the FSA had identified “good and poor practice” among firms during its review.
New media channels include social networking websites (Twitter and Facebook), forums, blogs and iPhone applications.
Industry experts have hailed the power of social media to gain new clients for advisers and many advisers have already taken to the new channels.
But regulatory uncertainty has been regarded as a key concern holding some firms back from utilising the channels fully.