Summary and opinion on the FCA Guidance Consultation called Social media and customer communications: The FCA’s supervisory approach to financial promotions in social media. Covers the main implications including potential restrictions on use of short-form social media for financial promotions, opportunity to generate additional communication between customers, restrictions to non UK companies targeting UK consumers.

1. FCA Social Media and Customer Communications : Summary of guidance consultation
FCA Social Media and Customer
Communications
Summary of guidance consultation
Black Swan Partners Limited
26 August 2014
1 | P a g e
Version Control
Document
Version No.
Date Author Change Description
V1.0 13 August DC, HP & SM Final Document

2. 2 | P a g e
Contents
1. Implications 3
1.1 Social Media and Promotions 3
1.2 Interaction on Social Networks 3
1.3 International Communications 4
1.4 Further information Error! Bookmark not defined.
1.5 Contact Details Error! Bookmark not defined.
2. FCA Guidance Consultation Summary 5
2.1 Social media and customer communications 5
2.1.1 Introduction 5
2.1.2 FCA Objectives: consumer protection and competition 5
2.2 The FCA’s supervisory approach: a statement 5
2.3 What are social media? 5
2.4 What is a financial promotion 5
2.5 Fair, clear and not misleading 6
2.6 Stand Alone Compliance 6
2.7 Risk warnings and other required statements 7
2.8 Other regulatory issues 7
2.8.1 Recipients sharing of forwarding communications 7
2.8.2 International communications 8
2.8.3 ‘Real time’ and digital media 8
2.8.4 Approval and record-keeping 8
2.8.5 Advertising Standards Authority 8
Copyright Information
© Black Swan Partners Limited 2013
This document contains information which is confidential and of value to Black Swan Partners. It may be used only for
the agreed purpose for which it has been provided. All proprietary rights and interest in this document and the
information contained herein shall be vested in Black Swan Partners and all other rights including, but without
limitation, patent, registered design, copyright, trademark, service mark, connected with this publication shall also be
vested in Black Swan Partners. No part of this document may be redistributed or reproduced in any form or by any
means or used to make any derivative work (such as translation, transformation, or adaptation) without written
permission from Black Swan Partners. All third party trademarks referred to herein are the property of their
respective owners.

3. 3 | P a g e
1. Implications
1.1 Social Media and Promotions
The requirement to have a risk warning on every financial promotion has significant implications
for the use of twitter and other limited character social media. In essence, it is very difficult to
communicate a financial promotion in 140 characters that is meaningful and effective as well as
compliant, as the example later in this document demonstrates. The FCA paper itself highlights this,
stating in paragraph 2.9 that ‘firms should consider the appropriateness of character-limited media
as a means of promoting complex features of products or services’.
The paper proposes one alternative – tweeting an image or link that contains a more in-depth
communication, including a prominent risk warning. However, as it is possible for some users not
to view images automatically, and some may not click on a link the tweet and the image/link
content has to be compliant on a stand-alone basis. This is likely to mean that the tweet text could
not contain any inducement or invitation to engage in financial activity.
The ability of firms to engage with clients or potential clients by twitter is also somewhat limited, as
anything that the firm retweets, even if it was not the originator of the tweet, also needs to be
compliant. The firm would therefore be unable to retweet an endorsement if it contained an
invitation to engage in financial activity.
Overall, this means the companies will have to continue to explore the use of alternative social
marketing mediums such as blogs and video and we expect to see a shift to promotional activity
where the social media will support suitable risk warnings.
1.2 Interaction on Social Networks
We believe that the most significant opportunity to come out of this consultation will relate to the
ability of retail financial clients to communicate with each outside the FCA’s regulation1 and the
implications this can have.
A recent survey found that 90% of consumers would recommend a brand to others after
interacting with them on social2. If retail financial service providers are able to embrace this
opportunity it could deliver significant corporate as well as client benefits.
This opportunity includes non financial specific networks including Twitter, LinkedIn, Google+,
Facebook, Youtube and Pinterest as well as existing financial networks such as Stocktwits,
Interactive Investor and eToro.
Enabling users to discuss investments, trading ideas and service providers will in the long-term help
drive transparency and ultimately improve the offerings available.
With the course of business regulatory ‘carve out’, it will be important that corporates are able to
clearly distinguish between individuals posting as individuals ‘not in the course of business’ and
others posting social media content for commercial gain, whether as affiliates or paid contributors
to networks. This will be particularly relevant for social trading companies.
1 http://www.fca.org.uk/static/documents/guidance-consultations/gc14-06.pdf Clause 2.5
2 Your Brand Sux – www.iabuk.net/about/press/archive/iab-research-shows-social-media-drives-roi-for-fmcg

4. 4 | P a g e
1.3 International Communications
The paper makes clear that the FCA’s rules cover any financial promotion that is capable of having
an effect in the UK, unless an exemption is available. This has particular implications for social
trading firms. The FCA is scheduled to release guidance on copy trading later in 2014, and until it
does some firms, regulated in EEA jurisdictions outside the UK, have continued to engage in
activities which the FCA has suggested to UK firms are non compliant.
It is also interesting that one of the illustrated examples used in the paper is an example of a social
trading communication, the non-compliant tweet shown in figure 1. In the past, the FCA has paid
little attention to social trading.
The paper suggests that in future all operators accepting UK clients, regardless of the regulatory
jurisdiction, will need to ensure their social media communications are compliant with FCA
regulations.

5. 5 | P a g e
2. FCA Guidance Consultation Summary
2.1 Social media and customer communications
2.1.1 Introduction
Digital media are now becoming the media of choice for customer communications and specifically
for financial promotions.
Firms are using social forms of digital media (social media) for their communications with
customers.
The FCA rules are intended to be media-neutral to ensure that customers are presented with
information in a fair and balanced way.
The overarching principle is that any communication should be fair, clear and not misleading.
2.1.2 FCA Objectives: consumer protection and competition
The FCA wants to promote effective competition in the interests of consumers, as well as consumer
protection. Digital media can allow new and smaller firms to have a presence in the marketplace.
Social media specifically may allow businesses to reach a wider audience. In principle this can make
it easier for consumers to switch providers, and so enhance competition.
There are significant potential benefits from the use of all digital media by firms, provided this is
responsible and customer-focused.
2.2 The FCA’s supervisory approach: a statement
2.3 What are social media?
Social Media are ‘websites and applications that enable users to create and share content or
participate in social networking.’
It can be broken down in to the following:
 Blogs / Microblogs
 Social Networks
 Image / Video-sharing platforms
 Forums
The FCA recognises that social media are a powerful channel of communication and of significant
value to firms. They do not want to prevent their use.
2.4 What is a financial promotion
Any form of communication is capable of being a financial promotion, depending on whether it
includes an invitation or inducement to engage in financial activity.
For social media it is clear that a promotion is a promotion. One generally accepted way to do this,
for character-limited media is the use of #ad

6. Uses 130 of 140 allowed
characters (including
image) yet far from a
meaningful or effective
promotion, so much so
that risk warning takes up
more space than advert.
6 | P a g e
2.5 Fair, clear and not misleading
Principle 7 of the Principles for Business states that it is a fundamental requirement that all
communications are fair, clear and not misleading. This stands even if a post ends up in front on a
non-intended recipient via re-tweeting on Twitter or sharing on Facebook.
Firms should also consider the appropriateness of character-limited media as a means of
promoting complex features of financial products.
 Twitter (140 Characters)
 Vine (Six Second Video)
 Pinterest (500 Characters)
It may be more appropriate to use ‘image advertising’ to promote a firm more generally.
Below are examples of acceptable and unacceptable promotional tweets:
The first figure shows an example of a tweet where the promotion lacks balance, as it over-emphasises
the benefits and includes an inadequate risk warning. It fails to comply with the past
performance rules as it makes the indication of past performance the most prominent feature, and
fails to include performance information of the preceding five years.
The second figure is an example of a fair, clear and not misleading tweet, conveying a prominent
warning within the character limitation. It also makes clear that the message is a promotion by
adding the hashtag #ad.
Figure 1: Examples of non-compliant (left) and compliant (right) financial promotion tweets
2.6 Stand Alone Compliance
Each communication needs to be considered individually and comply with the relevant rules. Risk
warnings need to be clear and not in much smaller fonts that get lost in the surrounding text.

7. 7 | P a g e
2.7 Risk warnings and other required statements
There are requirements to include risk warnings and other statements in promotions for certain
products/services.
A possible solution to the problem of character limitation is to insert images which allow relatively
unrestricted information to be conveyed.
Image advertising is advertising that only consists of the name of the firm, a logo or other image
associated with the firm, a contact point and a reference to the types of regulated activities
provided by the firm or to its fees or commissions.
Figure 2: Compliant tweet containing image
Twitter images are not always permanently visible
therefore where the financial promotion triggers a risk
warning required by the FCA, this cannot appear solely
in the image.
Firms can tweet a link to a website with financial
promotion but the signpost must be standalone
compliant.
For example:
 ‘To see our current mortgage offers, go to www.whaftmortgages.co.uk’
This is compliant – the wording does not create a financial promotion
 ‘To see our great mortgage offers, go to www.wharfmortgages.co.uk’
This is non-compliant – the element of inducement with the word ‘great’ creates a promotion
that then requires a risk warning.
2.8 Other regulatory issues
2.8.1 Recipients sharing of forwarding communications
Where a recipient shares (e.g re-tweet) a firm’s communication, responsibility lies with the
communicator, so in that case the firm would not be responsible.
Any breaches of the FCA rules in the original communication are still the responsibility of the
originating firm, and not the ‘re-tweeter.’
Where a firm re-tweets a customer’s tweet, the firm is responsible as the communicator, even
though the firm did not generate the content of the communication.

8. 2.8.2 International communications
Digital communications are not limited to national borders. There are also a number of measures
in place within the European Economic Area (EEA) to facilitate trade and commerce within the EEA.
As the UK regulator, the FCA rules cover all financial promotions capable of having an effect in the
UK.
2.8.3 ‘Real time’ and digital media
Digital media may not fall within the definition of ‘real-time’ communication under article 7 of the
Financial Promotion Order (FPO).
Promotion is non-real time and therefore subject to the FCA conduct of business rules where it
creates a record of communication, is directed at multiple recipients, and does not require the
recipient to respond immediately.
The FCA considers a tweet a non-real time promotion.
2.8.4 Approval and record-keeping
Firms have an obligation to have an adequate system in place to sign off digital media
communications by a person of appropriate competence and seniority within the organisation.
Firms should keep adequate records of any significant communications. Firms should not rely on
digital media channels to maintain records as older material is often deleted.
2.8.5 Advertising Standards Authority
Advertisers are required to adhere to the Committee of Advertising Practice Code, which applies to
‘non-technical’ elements of financial advertising, for example matters of social responsibility, harm
and offence.
8 | P a g e
2.9 Further information
For further questions on the FCA paper, or for any other information about the retail trading and
investment sectors, please contact Black Swan Partners using the details below:
2.10 Contact Details
For further information, please contact:
Dominic Crosthwaite Director, Black Swan Partners Limited
Email: dominic@blackswanpartners.co.uk
Tel: 0203 176 0090
Mob: 07764 195 501
Skype: dcrosthwaite
Stuart Millson Consultant, Black Swan Partners Limited
Email: stuart@blackswanpartners.co.uk
Tel: 0203 286 8975
Mob: 07786 551 764
Skype: stuart.millson