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Understanding FCA Financial Promotions Rules: a Quick Guide

Updated: Oct 23, 2024

The Financial Conduct Authority (FCA) are the key regulatory force within the UK finance sector. While they may not be associated with knowing a ton about social media, they’ve quickly become the main regulators when it comes to financial promotions—be it on social media or otherwise. 


Key Definitions Of The FCA Financial Promotions Rules

The FCA financial financial promotions rules simply concern themselves with the communications that engage with customers about potential investment activities. In 2024, these communications include everything from brochures to Tweets. 


An "approved person" is someone approved by the FCA to perform certain functions within a firm, such as approving promotions. This can either be internal or external. The "financial promotions order" refers to the legislation governing how these promotions are managed and distributed. 


Core Rules and Regulations 

The core principles require that all financial promotions are not misleading. This may be within its content (performance figures or fees), as well as how the content is communicated (the font it is in).


Information must be presented in a way that is easy to understand without hiding important details. 


All disclaimers and risk disclosures must be in plain language, free of jargon, and easily visible to the audience. Another key rule is that promotions must not exploit the target audience's lack of experience or knowledge. They should be "standalone compliant", meaning each individual communication must comply with the rules when considered on its own, even if part of a larger campaign


Firms also need to be balanced in their communications, meaning they contextualise the benefits with the risks.



The Importance of Compliance 

Non-compliance with FCA rules is a serious problem. The FCA has the power to impose fines, revoke licences and even pursue criminal charges against firms that breach its rules. 


In 2020, Barclays Bank UK PLC, Barclays Bank PLC, and Clydesdale Financial Services Limited were collectively fined £26,056,400 by the Financial Conduct Authority (FCA). The fine was imposed for breaches of Principles 3 and 6, as well as Consumer Credit sourcebook (CONC) rules. This penalty was a result of the banks' failure to treat customers fairly and provide clear, non-misleading information in their financial promotions.


When consumers see that a firm adheres to FCA rules, they are more likely to trust that firm's products and services. This trust can translate into increased customer loyalty and a stronger reputation in the market. 


The FCA conducts proactive monitoring of websites and social media, reviewing around 140,000 websites in 2023 which led to over 1,500 alerts being issued for potential non-compliance


FCA Financial Promotions Rules: The Impact on Businesses

The FCA introduced new rules for cryptoasset promotions in October 2023, and initial reviews found significant non-compliance, including issues with the use of "finfluencers" and inadequate risk warnings.

 

FCA rules significantly affect how businesses approach marketing and advertising. Firms must carefully review their promotional materials, meaning they need to spend more time monitoring and reporting on it.


It may also mean working closely with compliance officers and legal teams to vet crypto advertisements before they are published, but also leveraging technology better.


Firms must stay updated with any changes in FCA regulations to remain compliant, otherwise, they risk operating according to outdated literature. This applies to all employees, not only to keep their skills sharp and knowledge fresh but to instil a culture of compliance from top to bottom (remember, it could be a marketing intern that lands you in hot water because of an unverified LinkedIn comment).


Non-financial firms that offer investment products, such as certain crowdfunding platforms, must also comply. The FCA identified a network of over 90 UK registered firms linked to just 5 initial companies that were promoting financial services without appropriate authorisation, showing how non-compliance can spread.


Examples of Compliant vs. Non-compliant Promotions 

An investment firm's advertisement that states potential returns is only compliant if they: a) are clear about this being potential (and that past performance isn’t an indicator of future results), and b) mention the risks associated. It should explain that the value of investments can go down as well as up and that investors may not get back the amount they invested. It must also be clear, not a reluctant, small print disclaimer.


Non-compliant promotions, on the other hand, often omit these crucial details. For instance, a non-compliant ad might highlight only the potential high returns without mentioning the associated risks, or they may do so in a brown font on a black background. 


This is an opportunity, however, to point your promotions towards a more authoritative and less salesy brand voice, perhaps being a place customers go to for education and commentary. 



Best Practices for Ensuring Compliance 

To ensure financial promotions compliance with FCA rules, businesses should adopt several best practices. First, always use simple language in promotions and never assume prior knowledge of a customer base. This even includes a follow-up Tweet five seconds after your previous, because we need to understand that some of the viewership may not have seen the context of the other Tweet.


Secondly, prominently display risk warnings and disclaimers—be proud that you’re open about them. These should not be hidden or obscured by other content. 


Thirdly, regularly train marketing and compliance teams on FCA rules and updates, and be sure that all output is authorised by a second opinion. 


The FCA also expects firms working with affiliate marketers and influencers to take proactive responsibility for overseeing how these third parties communicate. In other words, you remain responsible for their output, even when giving them creative freedom.


Final Word

Although some of these FCA promotional rules are new, they remain intuitive and rational. However, firms can still get tripped up by them, particularly by forgetting risk warnings or accidentally assuming prior knowledge. Therefore, set processes should be put in place for all promotional material, so none of it is improvised or in the hands of a single marketer.


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