Compliance and social media
Social Media rules for those regulated by the FSA
It is a fact of life that all businesses need to consider the benefits that can be provided from using new media to promote their products and services. The Financial Services Authority (FSA) regulates the majority of financial promotions in the public domain. This includes using online social media such as Twitter, LinkedIn and Facebook so users must be aware of the compliance rules that prevail. The scope of the FSA rules includes all new media channels including social networking sites, forums, blogs and smart phone/i phone applications.
The FSA rules
The first point of call for compliance guidance is the FSA financial promotion rules which are media neutral, which means that the financial promotion rules are the same regardless of whether you publish an advertisement in the local newspaper or post a blog online which promotes your financial services business.
The FSA communication and financial promotion rules which cover over a hundred pages are split into sections within the Conduct of Business (COBs) rules. The COBs for investment activity has the following sections:
The full rules can be seen at http://fsahandbook.info/FSA/html/handbook/COBS/4
There are further financial promotion rules to accommodate the wide range of financial products and their differing characteristics.
The FSA financial promotion rules are split across the following product categories:
MCOB 3 applies, seen at: http://fsahandbook.info/FSA/html/handbook/MCOB/3
BCOBS 2 applies, seen at: http://fsahandbook.info/FSA/html/handbook/BCOBS/2
ICOBS 2 applies, seen at: http://fsahandbook.info/FSA/html/handbook/ICOBS/2/2
Social Media benefits
New media is ideal to build up your brand image and to share views. Over time, new media may develop into a perfect marketing medium to distribute products and services but, for example, whilst Twitter applies a 140 character limit there are restrictions to what messaging can occur which make it complex to promote products and services under the FSA financial promotions rules.
If you are simply mentioning one or more of the following: your firm’s name, showing a logo or using an image associated with your brand, contact details, mentioning the types of services or products provided, or talking about fees or commission - this is known as image advertising. The treatment of image advertising under the FSA rules varies depending on the type of product and therefore on which sourcebook applies but in many cases image advertising becomes exempt from most of the financial promotion rules. However the ‘fair, clear and not misleading’ rule always applies. When a communication goes beyond the definition of image advertising, it must comply with all relevant
There can be dozens of different financial promotion compliance rules applying to social media activity with different rules for different products and services. For this reason the expertise of compliance experts is needed before embarking on a social media strategy. Unbiased.co.uk recommends the following guidelines are always adhered to when using new media:
- If a social media message is balanced, then the audience should be able to read the item and understand exactly the nature of the product or service, their commitment and the risks associated with that product or service.
- There must not be undue prominence given to the benefits at the expense of the corresponding risk factors.
- The audience should never be in a position where they could be misled or have unrealistic expectations of the product or service that they may go on to buy.
Further guidance can be sought from a regulated firm’s compliance officer.