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The UK's New FCA Guidelines: What It Means for Advisors (Part 2)

shutterstock_137467250This is part 2 of a 2-part series. Read part 1 here.
Best practices for advisers on social media
By including what we consider to be the three vital elements of any best practice social campaign, the FCA guidance provides firms – and other European regulators – with a solid foundation on which to base their own social media policies:
1. Training: The guidance calls for investment in staff training so employees can understand the difference between appropriate and misleading content. This is especially important when employees use the same social media accounts for both business and personal purposes, where the lines between work and play can easily become blurred.
2. Supervision: The guidance covers the need for a robust approval process, ensuring that even the most diligent of adviser’s interactions are always checked and signed off.
3. Recordkeeping: Finally, it provides practical advice on how (and for how long) these campaigns should be archived, so firms can produce an accurate audit trail of how they’ve interacted with every customer.
Work is not done for the FCA
However, the rapid rate of change witnessed in the social media sector means that, to some extent, the FCA is always going to have to play catch-up with what’s happening in practice.  In comparison to equivalent guidelines in the US – which Financial Industry Regulatory Authority FINRA) introduced more than  five years ago, and where social selling in the financial sector is  ahead of the UK – the UK framework does have a few gaps.
The current FCA guidelines could be bolstered by adding more practical examples of both compliant and non-compliant activities.  Real life examples provide vital direction to busy advisers eager to implement campaigns without falling foul of the regulator.  While the framework does include a number of example tweets, posts and images to help advisers ensure their social content is always ‘clear, fair and not misleading,’ there are some omissions.  For example, it remains unclear whether an adviser could compliantly like or share a post from a financial institution without it being perceived as entanglement. Clarity of these points would clear up any lingering confusion and will likely be added to the guidance as the market matures and more use cases emerge.
Neither do the guidelines stipulate the penalties firms could face if their advisers breach these rules.  Nor is there any mention of how the FCA will audit firms to ensure ongoing compliance.  In contrast, FINRA more established guidance takes much more of a ‘carrot and stick’ approach to best practice.  As with the FCA, the carrot comes in the form of an actionable framework that is designed to empower financial advisers to confidently engage with customers over social channels. FINRA’s stick comes with its enforcement capabilities, comprising both auditing powers and penalties for non-compliance.
Final thoughts
It’s clear that the FCA’s framework is a hugely positive development for the industry. It’s increasingly impossible to ignore the potency of social media as a sales channel, and the regulator is making great strides to ensure firms understand exactly what they need to do to maximize this opportunity. Indeed, these guidelines should not be viewed as yet another tick box exercise to ensure compliance. Rather, the FCA has provided much needed tools to help advisers find and engage with a new generation of customers.
However, in my experience, firms are much more likely to continuously invest in the training, processes and systems that ensure best practice – and prevent mis-selling – if they know they could be audited and face penalties.  It will be interesting to see if the FCA toughens up its stance – transforming these guidelines into enforceable rules – as usage of social media by consumers continues to increase and social selling starts to gather real pace in the UK market.
This article was originally published on thewealthnet.
If you are interested in contributing to how social media should be regulated in the UK or in continental Europe, we are interested in hearing from you. Please contact us at
Disclaimer: The material available in this article is for informational purposes only and not for the purpose of providing legal advice. We make no guarantees on the accuracy of information provided herein.
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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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