Banks and financial services companies must comply with advertising rules when using Facebook and social media such as iPhone apps, the FSA warns and adds Twitter may not be a suitable medium for finance companies to communicate on at all..
The Financial Services Authority issued the warning after conducting a study examining how financial serices companies communicate with consumers which found some use of social media channels lacked compliance with industry rues.
Companies posted Twitter updates or commented on discussion forum threads without the proper disclaimers and risk warnings, the FSA says, and engaged in promotional behaviour without complying with all the FSA's rules.
The FSA studied 30 Twitter and Facebook pages and followed companies' behaviour on financial forums."Throughout the review we identified good and poor practice among firms who had adopted the use of new media to communicate financial promotions," an FSA statement says. "Some promotions lacked risk warnings. Other promotions, while not very specific about products or services, nevertheless went beyond the definition of 'image advertising'."
The watchdog warned companies that all their communications will come under scrutiny.
"Firms may not have considered these factors to meet the definition of a financial promotion and therefore have not applied the relevant communication rule," the regulator says. "Our rules cover all communications by regulated firms to clients, not just promotional ones. The rules for non-promotional communications are fairly high-level - the main rule is that communications must be fair, clear and not misleading."
The regulator also questions whether Twitter is an appropriate medium for financial firms to comminucate on at all. "It is important to consider whether a channel is a suitable method for the type of communication. For example, Twitter limits the number of characters that can be used, which may be insufficient to provide balanced and sufficient information,"
"It is important to consider whether the risk information could be displayed prominently and clearly using this media channel," said the FSA. "Promotions and communications made using new media must meet the requirements for stand-alone compliance."
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