The Financial Conduct Authority has published new guidance for social media influencers promoting financial services and products.
The guidance does not create new obligations for financial companies but clarifies how promotion of financial products should be communicated on social media.
The UK’s regulator points out that those who do not respect advertising rules are committing a criminal offence punishable by up to two years’ imprisonment and an unlimited fine.
Any promotion of a financial product should support consumer understanding by providing a balanced view of benefits and risks. It should also use clear language that consumers are likely to understand.
Moreover, unauthorised persons, such as social media influencers, who promote a regulated financial product without FCA approval, may be committing a criminal offence. The regulator suggests firms consider whether a social media platform is the best place to promote complex products.
A UK Finance spokesperson welcomed the action from the FCA. “Misleading promotions can cause people to make poor financial choices and we know that a large proportion of fraudulent advertising begins online, leading to very serious consequences for consumers.
“This is exactly why [our campaign] Take Five to Stop Fraud launched its own TikTok campaign this week, to reach consumers where the fraudsters are. We would encourage anyone who sees a promotion on social media that looks too good to be true to be wary,” the spokesperson said.
Jonathan Cavill, financial regulation partner at law firm Pinsent Masons, said: “This warning not only underscores the need for increased compliance, but also raises commercial concerns for businesses and the broader financial industry. Companies must navigate the delicate balance between effective promotion and adherence to regulatory expectations, ensuring that their marketing efforts align with consumer protection guidelines.”
In July 2023 the FCA opened a consultation on the first new guidance since the last was published in 2015. Respondents generally welcomed updated guidance in light of the changing nature of social media and the introduction of significant regulatory changes, such as the Consumer Duty. Several respondents asked for more specific guidance about how to comply with the Consumer Duty.
Today’s guidance follows the surge in popularity of social media. As one example, the FCA found in 2021 that 54 per cent of new investors aged 18 to 34 used social media as source material when researching investing, with 17 per cent specifically using social media influencers.
Risks are increasing as well. Last year the FCA removed more than 10,000 misleading adverts, up from around 8500 in 2022.
Aside from the UK, regulators around the world are taking action to try and hold finfluencers to account. In 2022, the International Organization of Securities Commissions published a report on Retail Distribution and Digitalisation with measures that members should consider using when deciding on any new rules on the topic.
