When is a Non-Advert an Advert? Social Media Advertising Pitfalls For UK Financial Services Firms Firms cannot assume that because a communication is made using new media, it is an image advertisement and exempt from the financial promotion rules. th30 June 2010 Lee Werrell CEI Compliance Limited
When is a Non-Advert, an Advert?IntroductionThe FSA have warned that Financial services firms should pay particular attention to theirvarious social networking and other internet communications including iPhone apps tomake sure that they stay up to date and compliant with the FSA handbooks.ProblemThe FSA has studied the way that financial services companies communicate to the publicand has found that some of communication through the new social media channels lackscompliance with its safeguards.The RulesFinancial Promotions rules are clearly provided in Conduct of Business Sourcebook(COBS) Chapter 4 and firms must apply all the strict advertising rules their formalcommunications are subject to, strangely enough, use of Twitter, Facebook, networkingsites or message boards.So what is Image Advertising?Firms cannot assume that because a communication is made using new media, it is animage advertisement and exempt from the financial promotion rules. An imageadvertisement only consists of the name of the firm, a logo or other image associated withthe firm, a contact point and a reference to the types of regulated activities provided by thefirm or to its fees or commissions. When a communication goes beyond the definition ofimage advertising, no matter how well intentioned or innocent it may seem, it will need tocomply with all of the relevant financial promotions rules.The treatment of image advertising varies depending on which sourcebook applies.CEI SolutionsSolution 1Ensure that whenever you advertise on any other “new media” communication channel,make sure that you do not include anything other than “image” advertising content.Solution 2If you are going to post anything on a message board or Networking Site page, ensure thatit fulfills the requirements of the FSA. See COBS 4, MCOBS 3 and don’t forget ICOBScontains no exceptions for image advertising. Also the new rules for websites from the OFTneed to be considered as they have the power to shut the site down if it infringes any rule.
Solution 3If in doubt call us on 0800 6899689 to look into your campaign and the impact ofthe regulationsSummaryThe safest way of using the new media is to ensure you apply the specific financialpromotions rules with the fundamental starting point of clear, fair and not misleading.The FSA call this “stand-alone compliance”. This describes their expectation that everyfinancial promotion must comply with all of the relevant financial promotions rules. It is notacceptable, for example, for any firm or individual to purposely omit important riskinformation just because they intend to give it later in the specific sales process.What you have to consider about your financial promotion is COBS 4.2.2, which states "ina way that is appropriate and proportionate taking into account the means ofcommunication and the information the communication is intended to convey".It is unclear if you were to state your company name on a tweet in Twitter and added a linkto your company website whether this would be image advertising or a standalone financialpromotion using all 140 characters of that medium. It is unlikely that the FSA would beparticularly stringent or prescriptive in that area.So whatever medium you use to spread the word you need to consider the financialpromotions rules in most cases as they apply to your discipline. The FSA are continuing toreview and assess adverts across all media types and categories. However the message isclear from the regulator that they will take action against any firms that fail to producestand-alone compliant financial promotions picked up through their monitoring or thematicreviews.For the FSA Publication, please click here.For a description of “Stand Alone Compliance” please click here.CEI is a financial services compliance specialist company helping all sizes offirm; from IFAs to Investment banks, with their regulatory requirements andcompliance challenges.For help with any of your compliance issues, please call0800 689 9 689
Companies we have been involved with in the last 11 years; CEI Compliance can help provide a full compliance support service, reducingrequired management time, ensuring all areas are up to date and working for your firm’s long term benefit. Call 0800 689 9 689 today or go online at www.ceicompliance.co.uk This whitepaper was written by Lee Werrell FInstSMM Chartered MCSI Cert PFS, founder of CEI Compliance Limited. Avoid S166 Skilled Persons Reports – download our free guide here Check out our other whitepapers at http://www.cei-compliance- limited.co.uk/reports_guides.htm