The Financial Conduct Authority has published a guide on how finance companies should promote their services through social media. In fact with the growth and establishment of investment companies 2.0, which manage their operations mainly through online portals, social media have become a powerful and fundamental media to attract new investors and clients. The FCA therefore deemed that more detailed guidance was necessary to guarantee investors’ protection.
- Clear, fair and not misleading. This is a requirement which is valid for any business communication, including financial ones. The information should be clear, fair and not misleading in order not to pose any risk on the consumer who may end up buying the wrong product.
- Risk warnings and other required statements. Existing requirements to include certain information, such as risk warnings, apply to social media communication too. This, nevertheless, poses a challenge on the usage of those social media that have a pre-set limit of characters, for example Twitter and Instagram. However, the FCA knows how valuable all social media are for digital investing companies and therefore suggests to circumnavigate the character limit by inserting images - including infographics - and attaching links to more exhaustive posts.
- Standalone compliance. Each communication (e.g. a tweet, a Facebook insertion or page, or web page) needs to be considered individually and comply with the relevant rules.
- Approval and record-keeping. Investment companies shall have an adequate system in place to sign off digital media communications. This sign-off should be by a person of appropriate competence and seniority within the organisation. They should also keep track of their communication, making sure not to rely for this on social media timelines.
This guide is the first case of a Financial Authority publicly recognizing the importance of social media communication for digital investing businesses and trying to find an adequate compromise, in order not to make it impossible for the companies to communicate through those channels and at the same time protect the investors from misleading communication.
Image credit to Tristan Maier http://bit.ly/1954WMg
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.