The FCA’s finalised guidance (FG24/1) details how financial promotions should be communicated on social media.  It also summarises responses to the July 2023 guidance consultation as set out in our previous Engage article.

FG24/1 seeks to clarify the application of the FCA’s existing rules and policies and provide guidance on the financial promotion perimeter.  The guidance is relevant to:

• Authorised persons involved in communicating or approving financial promotions on social media.
• Unauthorised persons, including influencers or other affiliate marketers, involved in communicating financial promotions on social media.
• Trade bodies that represent the above groups.

Key takeaways from the financial promotions social media guidance

FG24/1 reiterates the following key takeaways for firms:

• The financial promotions rules are medium agnostic. The guidance re-emphasises that any form of communications (including through social media) is capable of being a financial promotion if it includes an invitation or inducement to engage in investment activity.  This can include communications through ‘private’ or invitation only social media channels like chatrooms such as Discord and Telegram, posts on public forum websites such as Reddit as well as content or communications by unauthorised ‘finfluencers’.  Memes are also highlighted as a type of communication that is capable of being a financial promotion and subject to the financial promotion restriction – an example is provided in FG24/1.  The use of memes by finfluencers is particularly prevalent in the cryptoasset sector.
• The importance of standalone compliance - each communication must comply with the FCA’s rules when considered individually.   The FCA provides guidance on how to assess whether new forms of communication (such as Instagram stories) would meet this requirement.
• Adverts across social media channels must be fair, clear and not misleading, they must provide a balanced view of the benefits and risks and carry the prescribed risk warnings so consumers can make effective, well-informed financial decisions.  
• Firms should take proactive responsibility for how their affiliates communicate financial promotions.  This includes having appropriate monitoring and oversight systems to ensure that affiliates understand their responsibilities and do not communicate illegal or non‑compliant financial promotions. Firms remain responsible for the compliance of every promotion they make or cause to be made.
• Unauthorised persons, such as influencers, who promote financial products or services that are subject to regulation without the approval of an FCA authorised person are reminded that they may be committing a criminal offence punishable by up to 2 years imprisonment, the imposition of an unlimited fine, or both.  Influencers should consider whether they are the right person to promote a product or service when considering what rules and standards apply to their activities.  This includes the ASA’s expectation that they must label their content as an advertisement upfront (including affiliate links) if they get any form of payment.

Key questions that firms should consider in relation to social media financial promotions?

The guidance raises some important questions on social media financial promotions.

• Is the communication balanced? Firms are required to ensure that consumers will be presented with a balanced view of the benefits and risks of the promoted product or service. The appropriate level of detail for a promotion that supports consumer understanding will depend on factors such as target audience, what information recipients need to know, the kind of decision recipients will have to make and any potential sources of confusion.  Firms need to ask –  is social media the appropriate channel?
• Can the communication convey the complexity of the product? Social media supports quick customer engagement, which might not be suitable for all products, especially high-risk financial instruments that would be difficult for consumers to understand.  The likely audience should be considered.  For example, CONC 3.9.2G confirms that due to the complexity of debt counselling solutions it is unlikely that social media which provides restricted space for messages would be suitable for financial promotions about debt solutions.  Equally, the FCA is concerned about exempt buy-now-pay-later (BNPL) promotions and confirms that firms promoting BNPL products should include the relevant risks for these products.
• Are the risk warnings prominent? Space is at a premium for these communications; consider whether risk warnings have been truncated by the functionality of the platform as this may impact consumer understanding (supporting consumer understanding is a key requirement of the Consumer Duty).  Firms should refer to existing guidance on financial promotion prominence which includes good and bad practice.  Firms should also ensure that prescribed risk warnings are applied where required – e.g. for HRIs and high-cost-short-term credit products (HCSTC).
• Is the firm applying the relevant marketing restrictions for the products they’re promoting – e.g. firms that are promoting high risk investments (HRIs) should ensure that they are applying the specific promotion restrictions set out in COBS 4.12A, COBS 4.12B and COBS 22.  The entire risk warning should be clear and not require click-through access. Table 1 on page 20 of the guidance sets out how prescribed risk warnings should be applied to certain types of social media channels.
• What are the relevant Consumer Duty considerations? For example, is the financial promotion tailored to the target market and therefore likely to be understood by the audience (regular consumer testing may be appropriate)? Firms advertising on social media must consider how their marketing strategies align with acting to deliver good outcomes for retail consumers.  Is there a risk that consumers are getting bombarded by social media financial promotions where they are vulnerable? How can this risk be mitigated where it is driven by social media algorithms?  FG22/5  outlines good and poor practice under the Consumer Duty that firms should refer to.
• How should firms address the risk of forwarding and sharing? Social media content is often forwarded on or shared which could create non-compliance.  It will depend on the content and context of the social media post whether this will amount to communication of a financial promotion.   Firms remain responsible for compliance if they share the post even though the firm did not generate the original content of the communication.  Firms should review the existing guidance on communicating and its relevance to financial promotions in PERG 8.6.
• Affiliate marketing – does the firm have appropriate systems and controls in place? Firms are required to take proactive responsibility for how their affiliate marketers communicate financial promotions.  Firms are liable for the compliance of any financial promotion made by their affiliate marketer even if they have not been involved in the development or creation of the content – if the firm’s referral link is on the advert then they are responsible.  Firms should ensure they have proper systems and controls to manage how their promotions are used on social media.  Affiliate marketers should be aware of other standards and guidance applying to their activities such as the ASA’s guidance on online affiliate marketing.  

Next steps

The FCA is replacing its previous 2015 social media guidance with FG24/1 in light of the changing nature of social media and the introduction of significant regulatory changes such as the Consumer Duty since the last guidance was published in March 2015.   Whilst the Guidance does not create new obligations for those who promote financial products and services on social media, it does help to clarify how firms might approach complying with existing regulatory obligations.    The Guidance also helps to clarify for non-authorised persons when communications fall within the FCA’s regulatory perimeter and how the FCA’s rules might apply to their activities.

If you would like to discuss the finalised Guidance set out in FG24/1 with our financial promotion regime specialists, please get in touch with the Hogan Lovells contacts listed in this article.

Authored by Melanie Johnson.