The FCA has now published its finalised guidance on how financial firms should be using social media to promot their services while maintaining compliance with financial promotion regulations. The ‘FG 15/4 Social media and customer communications paper’ follows initial guidance published last August and reflects industry feedback during the intervening consultation period.
Broadly welcomed by the industry, the published guidance is a good start that clears up a few of the key issues that were previously a bit murky. For example, the clarification provided on dual responsibility (both the originating firm and any firms that “retweet” or “like” the content) for compliance was much needed. This type of interaction (“liking”, “sharing” etc.) is, to my mind, an active endorsement and should be treated as such.
Similarly, the revised decision on the use of the #Ad hashtag is to be applauded. This is not the correct use of a hashtag. Even when used in the proper environment, using a hashtag in this manner could be confusing for customers with the intended message being easily overlooked as an unwanted result.
Aside from the useful day-to-day application of the guidance, perhaps the directive that will impact firms the most covers ‘approval and record keeping’. The FCA suggests firms have an appropriately senior staff member responsible for its systems to ensure all communications (not just financial promotions) are compliant. In addition, firms must retain and be able to produce “adequate” records of “significant communications”.
While some of the guidance provided would not be considered prescriptive, it is clear that firms’ expected responsibilities within risk management have increased. Firms need to be judicious in terms of what they consider to be “significant communications” and take appropriate actions around the content.
They will also have to assess their current position and likely evolve to a point where they have suitable processes in place to retrieve and produce specific social media communications in a timely and thorough manner (in case the FCA or any customer complaint require compliance-related evidence).
With regard to eliminating confusion around sign off processes, the FCA could go further than simply giving firms the option of either ensuring all marketing or promotional material is signed-off by one suitably trained person, or training all staff. Smaller firms with limited compliance resources could struggle as to how to interpret this choice for the best.
Finally, there will be a segment of the market that aims to satisfy social compliance obligations by adopting a model in which all social media content must first be queued, reviewed and approved. This will inevitably hamper the usage and limit the potential of the ever-evolving and exciting social space. It would be counterproductive for the FCA to champion this model.
The beauty of social media is that it enables two-way, personal and immediate conversations. A better approach could be implementing appropriate policies and training for a firm’s social media, along with an effective archiving and supervision tool, for policy enforcement.
The bottom line is the bar has been raised for social media compliance. Regulated firms can no longer rely on social media content management or listening tools alone to manage the related activity and risk. If leveraging the many benefits of social media communications is a strategic part of their business, firms would be wise to consider a more comprehensive digital media archiving solution.
