Finfluencers on the radar of British watchdogs due to increasing use of social media

Published on December 7, 2023 by Mahima Sahney

Coming across posts recommending investment in a particular financial product/plan is common when scrolling on Instagram, Twitter or Facebook, but such posts do not go undetected by the British regulator. Financial promotions and advertising on social media platforms have spiked. This, combined with financial firms’ use of influencers (termed “finfluencers”), led to the Financial Conduct Authority (FCA) issuing new guidelines as a warning to influencers on social media who provide unsubstantiated advice on making financial decisions. These guidelines would help those who invest in financial products make informed and more cautious decisions on their investments.

Most financial firms use social media to increase their visibility and market reach. The directives have been issued mainly due to the following reasons:

• Financial firms are using social media platforms more extensively to execute their marketing strategies for their financial products.

• Social media influencers are providing low-quality information that is sometimes misleading and false when advertising via their social media handles.

• Advertisements do not cover all information on a financial product.

• Advertisements suggest investing in credit products and target young audiences who are more likely to trust the information provided by such influencers and make hasty financial investment decisions.

• The regulator wants customers to have all the information required and have information of superior quality before they make a financial decision.

• The regulator is focused on providing customers with the right information for making financial decisions without interference of the technology or platform used to convey that information.

• The regulator intends to bring criminal charges against influencers found to be promoting unfair, unclear or misleading information on financial products.

Whom this will affect:

• Purchasers of financial products

• Financial influencers and anyone who promotes financial products on social media without approval from the regulator

• The social media platforms used

• The financial firms that approve the content to promote their products on social media

• Any firm outside of the UK that promotes its financial products to UK customers on social media

Consultation guidance – takeaways:

The new guidance reminds financial firms of their responsibilities towards their customers when promoting financial products. Considering how sensitive the issue of social media is, the FCA wants financial institutions to be aware of their duty to customers so as to provide them with a good outcome.

The regulator aims to build a framework that is strong and keeps up with the changing financial-market landscape, so that reaching out to large audiences with accurate information would not be a challenge.

These new guidelines help the regulator

• Safeguard customer rights and objectives

• Maintain customers’ trust in the financial markets

• Ensure transparency

The FCA consultation on social media marketing ended on 11 September 2023. New guidelines will be released in 2024.

The FINRA and the SEC have already set guidelines on the use of social media for work purposes, and APAC regulators may follow suit in the near future.

How Acuity Knowledge Partners can help

We provide expert guidance to firms and a range of bespoke services including marketing material review and advertisement review, regulatory compliance review, distribution compliance, code of ethics monitoring, electronic communication monitoring and social media surveillance. Combined with our expertise in compliance, our subject-matter experts strive to maintain internal controls and help redesign workflow to mitigate inherent and potential risks identified under any policy or regulation.

Source:

• https://www.finra.org/rules-guidance/guidance/targeted-examination-letters/social-media-influencers-customer-acquisition-related-information-protection

• https://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-17-18.pdf

• https://www.sec.gov/about/offices/ocie/riskalert-socialmedia.pdf

• https://www.finra.org/rules-guidance/key-topics/social-media

• https://www.sec.gov/news/press-release/2022-221

• https://www.fca.org.uk/news/press-releases/social-media-guidance-set-revamp

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