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UK's FCA Sets New Rules on Social Media Use

shutterstock_79159834The Financial Conduct Authority (FCA), the UK’s regulatory body, recognizes the importance of managing social media in the financial services industry, and has recently published its guidance on using social media for financial promotions. In the UK alone, 58% of financial advisors say they use social media to actively engage with their clients and prospects, compared to 75% of financial advisors in the US sector. According to a social media survey by PAM Insight last year, compliance and regulatory concerns still present one of the biggest barriers to social media adoption among UK advisors. Yet, only a quarter of UK-based financial firms have introduced formal policies setting out social media best practices.
In the new guidance issued on March 13, 2015, the FCA outlines ways in which businesses can use social media for financial promotions in a way that is “clear, fair and not misleading.” The FCA’s acknowledgement that social media can be a significant value to firms in the way people communicate is a testament to the robust financial markets in the UK, the innovative nature of the companies and people, and the active participation by industry regulators.
Here are some important take-aways from the guidance:
1) ‘Click through approach’ and standalone compliance: Consumers’ tweets are standalone promotions and must comply separately with FCA rules, as well as being “clear, fair and not misleading.” This is also the case when tweets are used to link through to a website, known as the ‘click-through approach.’ Firms can apply this rule by having adequate systems in place such that every communication is monitored and supervised. For example, legal disclaimers can be given for each statement that is a financial promotion. These rules apply to all members of the financial firm that communicate “in the course of the business” and not just advisors or agents.
2) Distinguishing between personal and business use: Whether a social media post is compliant or not depends on the content that is being use for professional use, e.g. “in the course of business,” as opposed to personal use. Here are some practical tips for ensuring these requirements are met:

  1. Distinguish between the firm’s own social media sites, and sites for individual officers or employees at the firm. For the firm’s own sites, there should be a clearly defined policy about who is permitted to post material, and with what level of review (before or after the postings).
  2. Some firms only have firm-level social media sites, and prohibit individuals at the firm from making business-related postings on their own social media sites, although this approach is becoming less common.
  3. Firms should clearly distinguish between allowing for their advisors to use business-related sites for work versus their personal sites. For personal, non-business-related sites, advisors typically bar the individual from discussing business on those sites.
  4. Firms should monitor and retain content only on the individual’s business-related sites.

3) Responsibility when sharing or forwarding communications: Unlike other channels, “Retweets,” “likes,” and “shares” can take on a different meaning than the original communication on social media. The FCA declared that if a consumer shares or forwards content via sites like Facebook, LinkedIn, and Twitter, the firm is only responsible for the original communication. In this case, businesses should pre-review or post-monitor the appropriateness of any content. If, on the other hand, the firm is sharing a post that did not originate from the firm AND if the comment endorses the firm or their advisors’ posts that have regulated financial product or service, then sharing or forwarding by the firm will constitute a promotion by the firm. In this case, the firm is responsible for the retweet. The only exception to this rule is where the content is related to “customer service” which is an area that does not fall within the jurisdiction of the FCA.
4) Sign-off for digital communications: The FCA maintains, as it did in its earlier release, that firms have an “adequate system” in place to sign off on all digital media communications which it considers as best practice for managing business risk. Therefore it is important to think through the resource implications of social media. If a firm anticipates having multiple individuals with business-related social media activity, then the firm should make sure that it has adequate supervisory systems and compliance resources to monitor that activity. Firms should also think through crisis scenarios – have a plan in advance for how it would respond in social media in the event of an unexpected negative event/story.
5) Record keeping: To protect a company from legal, regulatory and reputational risk, a key requirement should be that the firm has the ability to retain and retrieve its social media communications, including both content from the advisor or agents, and the responses to that content. While the FCA does not provide specifics on length of time records should be retained, generally it is good practice (as is the case in US) to have a three to five-year retention period for communications with clients and potential clients. Third party technology solutions, such as Hearsay Social, allow firms to archive social media content, and to escalate content to supervisors or compliance for review. Further, with cybersecurity being in the forefront of financial services concerns, it is important to include social media in the firm’s information security program.
The key takeaway for businesses from this recent guidance is that the FCA is committed to providing clear and practical recommendations on how this new channel can be used in businesses to promote products and services in a way that is “clear, fair and not misleading.” However, there remain some challenges, the first of which is how these regulations can keep pace with evolving technology to ensure that guidelines continue to be practical and flexible for businesses. As firms scale and roll out their social media programs to their advisors and begin adhering to these guidelines through training, process, and social media compliant technology, the FCA may periodically revisit these new guidelines to adapt to this changing landscape.
To assist with this challenge and in the interest of creating an on-going dialogue within the industry and with the regulators, Hearsay Social is partnering with the Financial Services Forum to create an industry working group. The working group will provide continual ideas, practical tips and best practices for implementing social media channels in a compliant manner. If you are interested in contributing to how social media should be regulated, in UK or in continental Europe, we are interested in hearing from you. Please contact us at EUcompliance@hearsaysocial.com
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Yasmin Zarabi

Yasmin is responsible for Hearsay's legal affairs including commercial, compliance, regulatory and privacy matters. She is a thought leader in compliance for financial services, has been published in industry press and speaks at events around the world.

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