This is the pressing question advisers must ask – and for many, fear of coming to the wrong conclusion means erring on the side of caution and abstaining completely. Some firms go to even greater lengths and ban employees outright from using social media for business or from referencing their work on social networking sites they use in their personal life.
Let’s get one thing straight; the regulator is not anti social media. In fact, the FCA itself has a Twitter account (@TheFCA) and in its January 2014 ‘Regulation Round-Up’ sought feedback from users on “which other social media you think we should use”.
However, the FCA acknowledged the need for greater clarity on financial regulation and firms’ use of social media, and in response to increased questions from firms – rather than due to any specific concerns – new FCA guidance on social media is expected imminently (it was due in Q1 2014).
Compliance conundrum
Until then, the FCA’s financial promotion rules (COBS 4, BCOBS 2 and MCOB 3) apply across all media, making no distinction between local newspaper advertisements, a blog or social media post.
A financial communication that merely informs or educates will not normally be considered a financial promotion but must always be fair, clear and not misleading. A financial promotion is where a person, in the course of business, “communicates an invitation or inducement to engage in investment activity”. It is this last point that has advisers worried about social media engagement.
But social media-savvy advisers such as Martin Bamford, managing director of Informed Choice, argue “compliance with the FCA guidance on social media is clear and straightforward, and in any case it is surprisingly difficult to make a financial promotion on social media channels. It just doesn’t work like that”.
Ways to stay compliant
There is a variety of approaches to social media, and concerns about accidentally making financial promotions via social networks reveals a one-way communication mentality (“I’m using this medium to tell you something, to sell something”) that is the antithesis of online social interaction.
Discussing changes to taxation, considerations for estate planning, revealing factors you consider when selecting investment funds and offering other food for thought to clients via social media channels, need not breach current FCA guidelines.
Adviser firms can allay their fears by introducing a clear social media strategy for each platform. This should outline your aims (why you’re on the platform), intended audience, intended content to share, success measurement, and resourcing. A social media policy, outlining what is and is not permitted on company (and to some extent personal) social media accounts by employees, can easily be added to staff contracts to highlight social media accountability. This also shows a concerted effort to use FCA-compliant social media practices at the firm and can be used as evidence in any FCA enquiry.
Mr Bamford concludes: “Some adviser firms, particularly large networks and nationals, have applied a very strange interpretation of the FCA guidance on social media. If you treat social media like any other interaction with members of the public, you remain compliant with no need for draconian restrictions on its use. I suspect what large firms really fear from social media is their advisers becoming softer targets to recruiters, or delivering messages which are somehow inconsistent with corporate strategy.”
