social media / vectormine

In an effort to combat the risks investors face on social media, the U.K.’s Financial Conduct Authority (FCA) has proposed new guidance on the industry’s use of social media that aims to modernize the requirements for firms’ online promotions of financial products and services.

“We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm,” said Lucy Castledine, director, consumer investments with the FCA, in a release.

“We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online,” she said. “And for those touting products illegally, we will be taking action against you.”

The proposals noted that social media has evolved significantly since the FCA first issued its guidance in 2015.

Those initial requirements were focused on limited text platforms, such as Twitter, but more recently, “YouTubers and streamers have become a major source of financial promotions, and new platforms such as Threads or private communication channels such as Discord are increasingly being used to communicate financial promotions,” it said.

Additionally, firms are increasingly paying “finfluencers” to promote products and services to younger investors, the regulator said — adding that 74% of people aged 18 to 29 say they trust the advice of social media influencers.

“Often these influencers have little knowledge of what they’re promoting. This lack of expertise is reflected in the large number of promotions that are either illegal or non-compliant, making it likely that consumers will see poor quality information on social media,” it said.

The proposals are out for comment until Sept. 11, and the FCA said it intends to finalize its revised guidance by the end of the year.

New rules will also take effect on Oct. 8 to ban incentives to tout crypto investments, such as “refer a friend” bonuses, and to require new risk warnings from promoters.