The Financial Conduct Authority's (FCA) newly published guidance on social media promotion leaves firms with 40 characters to promote their products on Twitter, warned a consultancy as it criticised the regulator for "not going far enough" in telling firms what they are allowed to do.
Regulatory consultancy Bovill, which recently appointed a former Financial Services Authority (FSA) manager as a consultant in its wealth management team, accused the regulator of failing in parts of its new social media guidance, out on Wednesday, particularly its rules around character-limited promotions, such as Twitter.
The FCA proposed to add the hashtag #ad to flag up whether a post is effectively an investment promotion on Twitter but Bovill pointed out the tweet will still need to include the appropriate risk warnings.
The consultancy said: "For a tweet to be fully compliant without any additional material, it will still need to state: 'Your money is at risk. This firm is authorised and regulated by the Financial Conduct Authority'."
The lack of detailed proposals is likely to lead to confusion among firms and inconsistencies on how they apply the rules
According to Bovill this would leave firms with just 40 characters - less than a third of the total limit for a tweet - to guide consumers to the potential investment opportunity.
"The FCA has not indicated that firms could use their Twitter profile to alert consumers to these facts," it pointed out.
'Uncertainty and inconsistency'
Bovill also warned the regulator did not go far enough in explaining its position on social media financial promotions and could cause "uncertainty and inconsistency" in how firms promote their products.
In particular, the firm said, the FCA has not provided enough specific guidance to firms on how prominent risk warnings must be on websites and how single tweets can be 'standalone compliant'.
The FCA said any financial promotion must be "fair, clear and not misleading", while alerting consumers to relevant risks.
Each communication, such as a single tweet, needs to be considered individually and comply with the relevant rules, and firms can insert images, such as infographics into tweets, as an additional tool to stay compliant, it suggested.
Head of venture finance Gillian Roche-Saunders said: "It is good to see the FCA grappling with the challenges for firms of communicating with younger audiences through social media, but today's guidance from the FCA does not go far enough.
"The lack of detailed proposals is likely to lead to confusion among firms and inconsistencies on how they apply the rules.
"By introducing a new hashtag, the FCA is demonstrating a desire to be innovative and help firms use new tools to reach audiences that may no longer respond to traditional advertising.
"However, having just 40 characters to communicate a potential investment opportunity clearly and accurately to potential customers is going to challenging to say the least."
