Steven Knox and Marianne Murnin

Financial services firms are increasingly turning to social media to promote their products and services, often partnering with influencers to communicate financial promotions to their following.

This has given rise to the ‘finfluencer’ – individuals who share their financial opinions and recommendations on digital platforms. Often these individuals are not authorised by the FCA to offer financial advice, which is concerning given recent reports indicate that a third of Gen Z look to TikTok influencers for financial advice.

Against this backdrop, on 26 March 2024 the FCA published its ‘Finalised Guidance’ (FG24/1) to firms on using social media to advertise financial promotions to consumers. The guidance was issued alongside an FCA press release which warned “promotions aren’t just about the likes, they’re about the law”.

In this blog post we summarise the FCA’s expectations of firms communicating financial promotions on social media and explore broader commercial considerations for businesses when using influencers to promote their products.

The guidance

The FCA’s recent guidance applies to both authorised and unauthorised persons communicating or approving financial promotions on social media (as well as trade bodies representing both groups). The guidance makes clear that the FCA is not creating new obligations for firms, but rather, it indicates how firms should comply with their existing regulatory obligations.

The existing regulatory framework

Under section 21 of the Financial Services and Markets Act 2000 (FSMA) a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity, unless the promotion was made or approved by an authorised person, or an exemption applies under the FSMA (Financial Promotion) Order 2005. This is known as the financial promotion restriction.

The restriction is media neutral and applies to all financial promotions regardless of the channel of communication used and therefore includes promotions advertised on social media (even memes may be caught!). Consequently, it is essential that firms correctly identify when a communication on social media serves as a financial promotion to ensure compliance with the requirements.

Both firms and affiliate marketers (such as influencers) promoting the products could face serious repercussions for non-compliance, including up to 2 years imprisonment or an unlimited fine for an illegal financial promotion, or a fine for a non-compliant financial promotion.

The FCA’s expectations for social media promotions

From the outset, firms should consider whether social media is an appropriate method of communication for the promotion, taking into account the market they are looking to target and the information consumers should be made aware of.

If it’s determined that social media is an appropriate channel, firms must review the FCA’s guidance to ensure their online promotions are compliant. Some of the key points from the guidance are summarised below.

• Standalone compliance: each financial promotion should be standalone complaint, meaning that each must comply with the FCA’s rules when considered individually. Promotions should provide a balanced view on the risks and benefits of the promoted product or service, containing an appropriate level of detail.
• Prominence: key information should be presented prominently, in a clear and identifiable manner and not obscured or truncated. Information that is required to be prominent should be presented in a way that is easily identified and understood by consumers, equipping them to make effectively, timely and properly informed decisions.
• Prescribed risk warnings: prescribed risk warnings must be used where necessary, such as high risk investments. And such promotions are subject to specific restrictions which are set out in the FCA’s Conduct of Business Sourcebook (COBS). Certain investments are banned from being mass marketed to retail investors and therefore should not be promoted on social media unless the firm has sufficient controls in place to ensure they will only reach the restricted target market.
• Affiliate marketing: firms should put appropriate measures in place to ensure influencers understand the relevant regulatory requirements and the financial product or services they are promoting.
• Territorial scope: the territorial scope of the financial promotion regime is intentionally broad. Therefore, international firms should be aware that the FCA may take action against non-compliant adds from overseas which target UK consumers.
• Consumer Duty: firms advertising on social media must consider how their marketing strategies align with acting to deliver good outcomes for retail customers under the FCA’s Consumer Duty.
• Compliance: firms must have adequate internal systems in place to sign off online communications in line with regulatory requirements and keep adequate records. Firms are expected to actively monitor the marketing actions of their affiliate partners to ensure good customer outcomes.

Engaging influencers

Before engaging influencers to promote products or services, firms should conduct proper due diligence. Regardless of how watertight the termination provisions maybe, or however quickly material is taken down, it will often be impossible to fully mitigate damage arising from mishandled social media promotions. Accordingly, prevention is better than the cure, with the most successful collaborations being those where the parties are clear at the outset regarding the advertiser’s goals for the campaign and the influencer’s degree of creative freedom.

Firms engaging influencers for promotions should carefully consider the following key contractual terms:

• Duration: an influencer’s popularity can fluctuate rapidly. Keeping engagements short protects against reputational damage. Firms should also consider including a unilateral right for the advertiser to extend the contract term particularly if engagement with the campaign has been successful.
• Exclusivity: depending on the profile of the influencer, exclusivity may be desirable. The influencer should also warrant that entering into and performing the contract does not conflict with any other arrangement the influencer has with third parties.
• Approval rights: firms should include approval rights to retain some element of control over the promotions. They may wish to mandate use of particular key words or phrases or to create a particular type of content. Once the level of control is decided, the process for submission, sign-off and publication of content must be clearly reflected in the contract drafting.
• Intellectual property: firms should secure an assignment of any intellectual property rights created including the content and images. If an influencer is high-profile (and contracts through an image rights company), firms should obtain a licence as wide in scope and period as possible to allow them to use the influencer’s name and likeness or to adapt or modify the content created in its own promotional material.
• Restrictions: Influencers should expressly acknowledge that the provision of the services does not give them any rights over the firm’s brand, names, logo or trademarks. The influencer should also warrant that the material they create will not infringe third party intellectual property rights.
• Termination rights: firms may require immediate notification and termination rights where the influencer causes reputational damage. In addition to standard provisions requiring compliance with “take down” requests, firms may also want to incorporate a “cleansing requirement” obliging the influencer to delete all previous posts relating to the firm or its brand if this reputational termination right is exercised. The contract should also set out how complaints from consumers and regulators should be handled.

Key takeaways

There are a host of both regulatory and commercial considerations for firms when marketing their products or services online, particularly when engaging the services of an influencer or third party. Not only are firms responsible for the compliance of their promotions, they also need to make sure the influencers they work with comply with the financial promotion rules and guidance. It’s therefore important that firms have both the appropriate compliance systems and commercial terms in place to oversee their affiliate marketers.

Marianne Murnin is a senior solicitor and Steven Knox is a trainee solicitor at Burness Paull