UK: “Finfluencers”, TikTok and the Consumer Duty

In response to the increase of financial promotions on social media platforms, including TikTok, Instagram, and content produced by 'finfluencers’, the Financial Conduct Authority (FCA) has initiated a consultation for updated guidance on financial promotions in the digital realm (GC23/2).

Given new ways of using social media and the introduction of new platforms, the FCA has recognised that the current guidance from 2015 no longer accurately reflects the social media landscape. The draft guidance seeks to clarify the application of key principles from the 2015 Guidance on Social Media and Customer Communications (FG15/4) to different social media marketing channels while addressing design features that obscure necessary information.

The draft guidance is also timely in light of the upcoming Consumer Duty, which raises the FCA’s expectation of firms who communicate financial promotions on social media above the requirement of Principle 7 to be ‘clear, fair and not misleading’. Principle 12 requires firms to act to deliver good outcomes for retail customers and this draft guidance will supplement the FCA’s expectations of this requirement for communications on social media.

Key Points

The draft guidance reiterates some key principles for firms.

• The financial promotions rules are medium agnostic. The guidance re-emphasises that communications on social media can be financial promotions regardless of their form. This could include communications through ‘private’ or invitation only social media channels like chatrooms such as Discord and Telegram, posts on websites such as Reddit as well as content or communications by unauthorised ‘finfluencers’.
• The importance of standalone compliance. The FCA reiterates this principle from the 2015 guidance and provides guidance on how to assess whether new forms of communication (such as Instagram Stories) would meet this requirement.

The draft guidance raises some important questions on social media financial promotions.

1) Is the communication balanced? The draft guidance notes that using a single image to promote a financial product or offering may not be appropriate to convey the ups and downs associated with investing or taking out the product. Firms need to ask –  is social media the appropriate channel?

2) Can the communication convey the complexity of the product? Social media supports quick customer engagement, which might not be suitable for all products, especially high-risk financial instruments.

3) Are the risk warnings prominent? Space is at a premium for these communications; consider whether risk warnings have been truncated by the functionality of the platform as this may impact consumer understanding.

4) What is the firm’s relationship with any “finfluencers” or marketing affiliates? The guidance includes detail on the FCA’s expectations for influencers operating in the financial services space. It draws upon existing guidance from the ASA and the FCA.

5) What are the relevant consumer duty considerations? For example, is the financial promotion tailored to the target market? Is there a risk that consumers are getting bombarded by social media financial promotions where they are vulnerable? How can this risk be mitigated where it is driven by social media algorithms?

6) How should firms address the risk of forwarding and sharing? Social media content is often forwarded on or shared and this risk also needs to be considered.

Next steps

The FCA's consultation is open until September 11, 2023, with the final guidance expected to be published later this year. Once this guidance is finalised, the FCA plans to retire the 2015 guidance.

This is an opportunity for firms to contribute their views, and (in the meantime) is a helpful statement of what the FCA expects from firms using these channels. If you have any questions, please reach out to Anahita Patwardhan or Michael Thomas.

Authored by Anahita Patwardhan and Aliya Padhani.