The Financial Conduct Authority (FCA) is proposing new rules to combat non-compliant financial promotions on social media platforms.
The FCA said its social media guidance proposals will “modernise” the information firms should use when promoting financial products or services online.
The regulator is running a consultation on its new guidelines over the next eight weeks and submission can be emailed to [email protected].
There is a direct crossover with the soon to be launched new Consumer Duty regulations that come into force from July 31.
The FCA said firms advertising using social media must consider how their marketing strategies align with acting to deliver good outcomes for retail customers.
All the cross-cutting rules will be relevant to social media promotions, and firms should take into account how promotions that do not support consumer understanding may cause consumers to buy products that are unsuitable for them, leading to foreseeable harm.
Lucy Castledine, director, consumer investments at the FCA, said: “We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm.
“We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online.
“And for those touting products illegally, we will be taking action against you.”
The FCA has been ramping up its scrutiny of online, often illegal, financial promotions, recognising the significant increase in notoriety of ‘finfluencers’ and the potential for consumer harm taking place online.
The FCA has also teamed up with the Advertising Standards Authority to help educate consumers and influencers about the risks involved in promoting financial products.
This work has included an infographic, roundtable discussions and live events to build up awareness of the harm that can take place.
FCA engagement has also helped secure changes to the advertising policies of several Big Tech companies to only allow financial promotions that have been approved by FCA-authorised firms.
The regulator said it will be continuing this engagement to ensure more is done to protect consumers.
The social media consultation follows the announcement of new advertising rules for crypto firms marketing to UK consumers.
From October 8 this year, the FCA will ban incentives to invest in crypto, such as ‘refer a friend’ bonuses.
Firms must also introduce clear risk warnings and a 24-hour cooling period to give first-time investors the time to consider their investment decision. These measures are similar to the regime in place for other high-risk investments.
The new social media guidance supports two of the FCA’s core commitments set out in the 2023/24 business plan to reduce and prevent serious harm and set and test higher standards.