FCA guidance on financial promotions in social media

The question

What requirements must those making financial promotions on social media follow under the FCA’s new guidance?

The key takeaway

Ads on social media which can be considered financial promotions are subject to tighter restrictions. Businesses are obliged to ensure they fully understand the reach of their ads and how they will be interpreted by any user to comply with the FCA’s Consumer Duty. They must ensure ads are clear, fair, not misleading, include risk warnings and adhere to compliance and record-keeping standards.

The background

In March 2024, the FCA published updated guidance on financial promotions on social media (the Guidance) following a consultation in 2023. Under s.21 of the Financial Services and Markets Act 2000 (FSMA), persons are prohibited from encouraging “investment activity”, save for where authorised. Whilst authorised persons are not subject to this prohibition, they must comply with the Consumer Duty to support consumers in making effective decisions. The FCA’s Consumer Duty requires firms to act in the best interests of consumers, ensuring their communications are clear, not misleading and provide all necessary information for consumers to make informed decisions. 

The Guidance clarifies obligations on those making financial promotions on social media and how individuals or bodies can ensure they do not fall foul of the Consumer Duty, which requires clear communications to enable consumers to make informed decisions.

The development

The Guidance distinguishes between those who are authorised to make financial promotions and those who are not and who would therefore breach the FSMA prohibition for making any statements that are financial promotions. 

Guidance for “authorised persons” revolves around understanding the end-user to the promotion, which may not be the intended audience. Promoters should ensure they provide sufficient and clearly visible information, guiding users if necessary, and consider the suitability of certain platforms for such promotions. For example, Instagram stories may not provide enough space to convey all necessary information within the given frames. 

The Guidance also gives specific rules for influencers on social media, who, unless authorised, will often breach the FSMA prohibition due to the wide-reaching definition of “in business”. The Guidance reminds influencers of their obligations under other regulations, including the CAP Code and platform-specific policies, while referencing platforms’ duties to remove “illegal content” under the Online Safety Act.

Why is this important?

Although the Guidance provides no new obligations, it highlights the renewed focus on social media responsibility, particularly in light of the FCA’s recent investigation into social media influencers for FSMA breaches in their online activity. The Guidance underscores the challenges with ads being widely disseminated on social media, necessitating that businesses weigh the risks when deciding to run financial promotions on these platforms.

Any practical tips?

• Review social media marketing policies: authorised businesses should review their social media marketing policies to ensure their ads comply with the Consumer Duty. They should also analyse their social media data to understand their typical audiences, beyond the intended user base.
• Engage influencers carefully: businesses using social media influencers in their marketing should ensure contracts have a tightly defined remit to prevent posts from breaching the FSMA prohibition.

Summer 2024