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FCA Consultation: Two week countdown

23 October 2014 | 02:47 am

The Financial Conduct Authority (FCA) Social Media ConsultationOn August 6th 2014, the Financial Conduct Authority (FCA) released guidelines for the use of social media in the industries it regulates. With the initial consultation closing on November 6th 2014, this is perhaps your last chance to shape the future.

With this in mind, we are dedicating todays blog to highlighting some of the challenges that we see the FCA regulated organisations will face once the guidelines are formalised.

The FCA guidelines are aiming to define the acceptable standards in relation to financial promotions in all digital environments that have the capability of being shared across social networking, with the ultimate goal of ensuring that the information presented is ‘fair, clear and not misleading’.  To this end, the guidelines cover blogs, microblogs, social networks, forums and images and video sharing platforms.

The consultation recognises that digital media environments are increasingly being used for customer communication but that many firms perceive difficulty in complying with the FCA rules.

The challenges identified include:

  • the potential sharing to ‘non intended recipients’
  • the need to present the risks alongside the benefits
  • the ‘character-limited media’ for promoting something as complex as financial products.

On the surface the ‘Social media and customer communications’ document portrays similar values to the regulation of more traditional advertising channels within the financial industry.  However, perhaps what is not explicitly discussed are the additional challenges brought about by social media’s speed of response requirements, the high volume of interactions and the resulting tide of activity that can make the understanding and interpretation of information complex.

Where compliance teams may have previously had to ensure a ‘two sets of eyes’ policy on one or two pieces of traditional communication each week, they are now expected to monitor, in some cases up to several hundred social media interactions per day.  This presents not only a logistical headache but potential delays in getting information out in a timely manner as creators of content await approval from compliance teams.

Article 2.23 emphasises the need to seek ‘approval and record-keeping’ in association with the compliance team.  We meet with a number of marketing and compliance teams, who tell us that this scenario creates tremendous challenges in managing workflow and information security.  The sheer volume of interaction and the need for immediate response demand strict protocols over social media management.

Whilst validation and moderation tools like CrowdControlHQ make light work of this, there is also the need to consider the audit trail of authorisation, determining who holds the ultimate responsibility for the ‘green-light’ allowing the social media to go-live.

It only takes one tweet, post or badly worded piece of dialogue for a brand reputation to come tumbling down leading to much debate around the boardroom table as to how to reduce the risks of social media. So no matter how large or small the marketing team is, the same rules apply in ensuring that the correct procedures are in place.

The FCA guidelines also states in article 2.24:

“Firms should also keep adequate records of any significant communication… Firms should not rely on digital media channels to maintain records, as they will have no control over this: social media in particular may refresh content from time to time, with the consequent of deletion of older material.”

In our experience, there are still many financial services companies who are finding their feet with social media management and need help in understanding the key elements required to remain compliant.  The UK social media market remain a laggard to the US and as a result we are flooded with North American social media management products who pull data off social media channels and store it overseas, immediately falling foul of compliance and creating a complex legal web, if (and when), there is a problem.

So taking 2.23 & 2.24 together, we can see two scenarios emerging.  The first related to problems created by people. The author of the content may get it slightly wrong, the message may be slightly off kilter with brand messages (leading to misinterpretation by the audience) and a validator may press the green light by mistake - classic human error.  Perhaps there may be some forgiveness in view of the sheer quantity of content created and the interactions arising as a result.

However, the second scenario would be where an organisation (particularly in relation to 2.24) gets the process wrong.  Perhaps taking a few short cuts, relying on the social media platforms themselves for audit purposes or pulling information off onto non compliant off-shore on insecure servers.

At the end of the day, the FCA are not solely interested in the public outcomes of work, but keen to question whether firms have put adequate processes in place to ensure compliance breaches do not happen.  This we believe will be where financial services companies will feel the pain (and perhaps the fines) the most.

The final point for debate is the issue of targeting.  This moves the issue on from the ‘what’ you want to say to the ‘Who’ question.  And the consultation refers to the issue of controlling the reach.  In debating this point, we would urge you to consider conversation that is beyond the ‘Soapbox’ technique.  There is no way of controlling a general tweet that is sent out into the big wide world of the web.  However, many organisations successfully target audiences through ‘listening’ techniques, responding to questions that relate to their products or services and we have no doubt that some progressive financial services companies will do the same.

Listening tools have developed into powerful promotional & sales aids, with custom targeting for audience, geography, tone of voice and key phraseology. And of course, listening is also a great way of researching and gaining insight for offline campaigns and promotional planning.

So the BIG question - will your compliance team be ready when the FCA come calling in early 2015?  We believe that as the UK’s leading social media risk management and compliance platform that we have a fundamental role to play in helping you remain compliant.  We will endeavour to support our clients in understanding not only the bigger picture when it comes to social media but the technology that sits behind some of the ‘compliance’ solutions on the market.  As a minimum these guidelines demand an infinite audit trail, secure data storage on UK shores and sufficient checks of anyone with access to your data.

As all FCA regulated firms move forward into Q4 of this year and Q1 of 2015, we have no doubt that the regulators will start to come calling on social media, so please ensure you have the adequate processes in place to meet their needs.

Comments to the consultation need to be submitted to Richard.Lawes@fca.org.uk or by Post Financial Promotions Team, The Financial Conduct Authority, 25 The North Colonnade, London E14 5HS by November 6th

Tweet @TheFCA

Greg Freeman
Social Media Risk and Compliance Specialist
CrowdControlHQ