Companies are failing to include risk warnings in financial promotions sent to millions of customers on social media like Twitter, Britain’s markets watchdog said as it proposed rules to clamp down on this practice.
The Financial Conduct Authority (FCA) on Wednesday launched a public consultation on its approach to supervising financial promotions on social media, which it said was in response to calls for guidance from the industry.
The FCA said some companies argued it was difficult to weave warnings into adverts sent by text, tweets, posted on Facebook pages or in online forums because of space limits. A tweet, for example, is limited to 140 characters and a text to no more than 160 characters.
But the watchdog said this was no excuse, citing examples of how warnings have been successfully included.
Consumers must be presented with certain minimum information, in a fair and balanced way, regardless of how an advert is sent, the FCA said in its consultation paper.
“..they must all comply with investor protection rules to make it clear the message is an advert.” “One generally accepted way to do this, for character-limited media, is the use of #ad,” the FCA said.
It could also be possible to include a link to more comprehensive information, provided that the promotion remains compliant in itself, the FCA added.
Gillian Roche-Saunders, head of venture finance at consultancy Bovill, said the proposals lacked detail on how to fully comply and would lead to uncertainty and inconsistency in the way firms promote financial products.
Introducing the new #ad hashtag was innovative but having just 40 characters to offer a potential investment opportunity once the risk warning was added was going to be challenging, Roche-Saunders said.
The FCA highlighted good practice with a tweet promoting a spread-betting service with a warning that a consumer’s capital is at risk and losses can exceed deposits.
In an example of bad practice, a tweet boasted that 500 people copied a trade done by a firm which made a 754 percent gain in a year, and urged people to follow him.
Since June 2011, the watchdog has asked six mortgage-related posts on social media to be changed or withdrawn, with a further nine related to investments, and 19 to consumer credit.
The consultation ends in November and final rules could be in place next year.
