Watchdog warns financial firms over social media marketing

Watchdog warns financial firms over social media marketing

The financial services watchdog has warned that promotional activity on social networking sites is subject to the same regulations as more traditional channels after an investigation found that some advertising was in breach.

Following a study of the way that financial services firms were communicating with the public, the Financial Services Authority (FSA) cautioned that all promotions occurring in informal channels ranging from social media to iPad applications and online forums such as message boards must include the usual disclaimers and risk warnings.

The regulator examined 30 Twitter and Facebook pages and also explored companies’ behaviour in financial forums.

It said in a statement: "Throughout the review, we identified good and poor practice among firms who had adopted the use of new media to communicate financial problems. Some promotions lacked risk warnings. Other promotions, while not very specific about products or services, nevertheless went beyond the definition of ‘image advertising."

Image advertising involves displaying company logos, names and a simple list of services provided and is exempt from many of the FSA’s regulations.

While the watchdog acknowledged that many organisations may not have felt that the adverts concerned met the definition of financial promotion, it said that its rules covered "all communications by regulated firms to clients, not just promotional ones".

"The rules for non-promotional communications are fairly high-level – the main rule is that communications must be fair, clear and not misleading," the FSA added.

But because of its requirements that adverts contain certain risk information "prominently and clearly", it could mean that new and social media were, by definition, unsuitable for certain forms of promotional activity.

"It is important to consider whether a channel is a suitable method for the type of communication. For example, Twitter limits the number of characters that can be used, which may be insufficient to provide balanced and sufficient information," the regulator said.

It would not be "prescriptive", however, if firms wanted to provide a link to further information using Twitter, a spokeswoman told law firm Pinsent Mason’s Out-Law.com web site. Instead it was up to each one to work out what the Conduct of Business Sourcebook 4 rules on communicating with clients meant for them.

"The rules are media neutral. Those rules and regulations stand regardless of whatever media you are using. Each IFA [Independent Financial Advisor] or each firm is going to market themselves in completely different ways," she added.

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