FCA gets tough on illegal financial promotions on social media
What steps is the UK’s Financial Conduct Authority (FCA) taking to combat the spread of illegal financial promotions through social media channels?
The key takeaway
The FCA has published an analysis of its financial promotions data for 2022. The data relates to action taken by the FCA against authorised firms in breach of financial promotion rules. Additionally, the regulator has reprimanded unauthorised firms and individuals. The report highlights the FCA’s active involvement in ensuring that quality marketing information is being delivered to consumers, with the regulator prepared to intervene in instances that pose potential harm to them. The role of online platforms and social media companies will increasingly be called into question as the FCA progresses its fight against online financial misinformation.
The background
The FCA has spent the past year increasingly scrutinising advertisements on social media platforms in relation to financial products and services. This comes amidst broader concerns regarding the impact of the rising cost of living to consumers, with the UK’s most vulnerable consumers at risk of being exploited.
Through its report, the FCA aims to illustrate the work being undertaken alongside social media platforms to improve standards across the market. The aim is to ensure that consumers are provided with clear, fair and trustworthy financial promotions which enable them to make informed decisions.
The development
The FCA report focuses on three broad stakeholders, being authorised firms, social media influencers and social media platform providers.
1. Action against authorised firms in numbers
FCA intervention over the course of 2022 led to 8,582 promotions being either amended or withdrawn altogether. This represents an increase of 1,398% when compared against 2021, which saw 573 amendments/withdrawals in comparison. These figures are indicative of the FCA’s increasingly stringent approach to authorised firms who flout its rules relating to financial promotions and referrals. Whilst it remains the case that the FCA itself has no powers to require sites to be taken down, there has been ongoing cooperation from platform hosting providers who have assisted the regulator in removing potentially harmful content. Moving forward, it is likely that the FCA will continue its approach of requesting assistance from platform providers in tackling illegal promotions.
2. Warnings issued to influencers
The FCA has flagged the growing impact of social media bloggers and influencers in the promotion of financial products. Particularly concerning to the FCA is the promotion of access to credit and investment products, on behalf of unauthorised third parties, to younger age groups. Coming under the colloquial title of “fin-fluencers” (influencers who publicise content on financial matters), the FCA plans to collaborate alongside external regulators to educate financial influencers of their responsibilities when promoting financial products and services. The FCA has indicated that it will not hesitate to refer for criminal investigation individuals who haphazardly publicise illegal financial promotions. Companies should therefore be increasingly alert to the potential perils of aligning themselves with influencers who choose to promote financial material.
3. Working alongside platform providers
The FCA seeks to establish a network of support and co-operation between itself as the regulator and social media companies as platform providers. “More needs to be done by tech companies to protect consumers”, with a growing onus on platform providers to help combat the spread of illegal financial promotions. Recent commitments from tech companies to change their advertising policies to ensure that ads for financial products on their platforms are limited to regulated firms represents a key step. However, with an increasing concern regarding the vulnerability of consumers, the FCA will undoubtedly demand more from platform providers over the next few years.
The FCA will continue to remain actively engaged in the review of online material to ensure that authorised firms are complying with its rules.
Why is this important?
The FCA has increased its capability of performing cross-platform searches across social media platforms to identify illegal financial promotions in larger volumes. We can therefore expect to see it being ever more vigorous in its monitoring of social media platforms and whether they are actively engaging in blocking illegal promotions. Those who take a lax approach to engagement are likely to face the risk of reprimand and the ramifications of being seen to facilitate fraudulent and illegal promotions could be significant. Of course, this is against the backdrop of the UK Government’s evolving Online Safety Bill, which is primarily aimed at the protection of young and vulnerable people.
Any practical tips?
There is growing pressure on social media platforms to adopt a more proactive approach in tackling illegal financial promotions, as well as monitoring influencer compliance in line with FCA requirements. With the FCA doubtlessly expecting platforms to utilise their capabilities to identify and remove illegal financial promotions as an issue of high priority, it makes sense for them to proactively engage with the FCA to help combat misleading information and to educate users of the risks associated with financial promotions. This expectation will only increase due to the current macroeconomic outlook and the heightened financial vulnerability of online consumers.
Spring 2023