Skip to content

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
Related posts:

On the road with LinkedIn, Facebook, and Efma across Europe

As Hearsay Social expands its international presence, we’re pleased to have spent the last couple weeks on the road with our partners LinkedIn, Facebook, and Efma across Europe.

At the LinkedIn Finance Event in London, Chris Andrew (Managing Director, UK and Europe, Hearsay Social) spoke on compliance best practices. He later joined the first European Facebook PMD (Preferred Marketing Developer) Summit held in Dublin and also participated on a panel with Lee Jay Burningham (Head of Financial Services, UK & EMEA, Facebook) at the Financial Services Social Media event in London. Peter Caryotis (Sales Director, Europe, Hearsay Social) also spoke at Efma’s Banking on Innovation event in Barcelona.

At the LinkedIn event, Forrest Baker (Head of Global Insights, LinkedIn), Christina Jenkins (Head of Insights, LinkedIn), and Laura Collins (Research Consultant, LinkedIn) presented on content and industry trends across the international financial services community. Some highlights from the event include new data on social media usage by high-net-worth individuals (HNWI):

  • 70% of HNW individuals in the UK use social media and this number is 99% in Hong Kong & Singapore.

  • In the UK, 71% of these HNW individuals access LinkedIn multiple times per week.

HNW individuals spend their time on social networks connecting, researching and reading up on business and financial information, following influencers and brands, and creating content of their own. Some other key findings:

  • 48% of these individuals have started gathering their own information on products and services, and they often use this information to complement the advisory services they seek out from financial firms.

  • 30% of HNW individuals have actively recommended or made a referral via social media.

Chris later took the stage to share a number of industry specific tips on compliance best practices, a few of which were highlighted by attendees on Twitter. He especially focused on the four steps to social business success: get found, build your network, “hear” or listen for key events, and “say” or build an engaged audience with quality content.


https://twitter.com/LinkedInMktg/status/477037214493593600

For a list of our upcoming global events please visit our website.  We hope to see you soon!

Read more:

The insurance industry in the digital world: Recap from the ABI Biennial Conference

Earlier this week, Hearsay Social joined industry leaders, leading politicians, journalists and regulators at the Association of British Insurers (ABI) Biennial Conference in London. The event’s theme, “Meeting the Challenges of a Changing World,” encouraged  a healthy debate about the major issues affecting the insurance industry (with a touch of British humor along the way).
Tidjane Thiam, Chairman of ABI and Chief Executive of Prudential Plc., opened the conference with a question: “How do we best respond as an industry to our customer’s rising expectations?”

Tidjane Thiam, Chairman, ABI

Later in his presentation, Tidjane spoke to global cultural and social changes affecting the insurance industry: “The digital revolution is another material change in people’s way of life […]  Our customers expect constant unlimited access to information.”
These new customer demands led the ABI to publish a report titled The Significant Seven outlining challenges facing the insurance industry:

  • The digital revolution and social media
  • Global convergence, with an increasingly interconnected and balanced global economy
  • The development and recovery of Western economies after the financial crisis
  • An aging society
  • Political challenges
  • Interventionist regulation
  • The continued impact of climate change

Representing Hearsay Social at the event, I spoke with many attendees about that topmost challenge, discussing how social media provides a channel to engage and educate customers and prospects. As insurance customers the world over increasingly adopt social media, social selling will likewise become essential.
As the day went on, the conference hosted lively panels with speakers like Nick Robinson (Political Editor, BBC News) and Steve Hawkes (Consumer Affairs Editor, The Daily Telegraph) who humorously reminded the crowd that insurance is not the most popular of industries. Nick told the crowd to remember, in difficult times, advice from Sir John Major who served as Prime Minister from 1990-1997: “When things are really bad, when your backs are against the wall, it’s time to turn around and fight.”
For videos and details from the event, visit the ABI website and follow the conversation at #ABIconf2013.