The UK financial regulator has released financial promotion guidelines for financial influencers and institutions.
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The Financial Conduct Authority (FCA) issued guidance on promoting financial products on social media on 26 March 2024.
The regulator warned that promoting financial products without approval from an FCA-authorised person with the right permission could constitute a criminal offence. The authority added that even when a social media influencer does not have a commercial relationship with a financial institution, their communications on social media about financial products or services may still be subject to the financial promotion restriction and require approval.
“Consumers need to be alert to dubious adverts and scams online, but it is important that influencers ensure they’re on the right side of the rules and consider what would happen to their own reputations if they’re found to promote products illegally,” the FCA warned. It added that customers are targeted with ads that are “illegal, unclear, unfair or misleading”.
The FCA said it expects promotions to provide a balanced view of risk and reward, and clearly communicate information that will help consumers make effective, well‑informed decisions.
The guide also highlights that financial institutions promoting themselves on social media must consider factors such as their target audience, what recipients need to know and the kind of decisions recipients could make. They must also consider whether any confusion could arise to determine how to support consumer understanding.
“It is crucial that they are given information that equips them to make effective, timely and properly informed decisions. This will enable them to make decisions in line with their risk appetite,” the FCA said.
The FCA also highlighted the responsibility that financial institutions must bear when working together with affiliate marketers, such as influencers, on how they communicate the promotions. Affiliates must understand their responsibilities and not communicate illegal or non‑compliant financial promotions, but financial institutions ultimately remain responsible for the promotions, the guide said.
The FCA said it expects each individual promotion to comply with the rules – meaning each individual communications such as reels, posts, streams meme formats must comply with the FCA’s rules. The FCA added that its rules catch communications through private or invitation-only social media channels such as Discord and Telegram.
Some promotions will also require specific information, such as a risk warning with prescribed wording, to be displayed prominently. These include high-risk investments, with the FCA saying that it expects the prescribed risk warning to be displayed throughout each promotion.
The FCA noted that this encompasses cryptoasset promotions, and urged those looking to promote crypto to also review the regulator’s specific guidance on the matter.
The social media financial promotion guide also references the Consumer Duty, and notes that it supports the FCA’s goal to reduce vulnerable customers and customers with lower risk tolerance from investing in high-risk investment products by 2025.
Finfluencer regulations globally
The regulation of financial promotions on social media and financial influencers, known as finfluencers, started gaining more attention as the FCA consulted on the matter last July. While some finfluencers may provide useful information and take the necessary disclaimers into account, regulators have expressed concern that some may act as unregistered investment advisers.
Other jurisdictions, such as India, are also seeing initiatives to regulate influencers. The Securities and Exchange Board of India (SEBI) consulted on the matter last August. Juris Corp partner Apurva Kanvide and associate Mannan Gala said in a client note that the regulator must strike a balance between fostering innovation and protecting investors from any material risks and losses, adding that SEBI’s consultation represents a significant development in this context.
The European Commission addressed concerns regarding transparency and disclosure to retail investors in the Retail Investment Strategy Package it proposed last May. It indicated that it wants to better regulate the finfluencers’ promotion.
EU member states such as France and the Netherlands have also taken action.
Bureau Brandeis partner Simone Peek and associates Casper Rooijakkers and Joris Viellevoije noted that the Dutch Authority for the Financial Markets (AFM) has been increasingly scrutinising finfluencers by launching investigations into their activities. They note that it is forbidden in the Netherlands to provide investment advice without a licence, and that giving out personal advice to carry out a transaction regarding a financial instrument may constitute investment advice.
“In practice, finfluencers regularly make recommendations on social media or video platforms about investment strategies, for example about the current or future value of a stock. If that recommendation relates to a financial instrument or its issuer, it is, in principle, an investment recommendation to the public,” they note.
France enacted Law No. 2023-451 on 9 June 2023 to regulate commercial influence and social media influencers. The law bans influences from marketing some financial investments and digital assets involving risks of loss for the consumer.