FCA chief calls for social media responsibility regarding fin promotions
Nikhil Rathi, CEO of the UK Financial Conduct Authority (FCA) has urged online platforms, such as social media and search engines, to take greater responsibility when it comes to financial promotions.
Mr Rathi noted that the FCA had seen a growing number of investors search for better returns online. Too many of these investment opportunities prove too good to be true.
“Ultimately, online search and social media firms need to take greater responsibility for their role in connecting consumers with these investment offers”, the FCA CEO said.
Previously, online platforms were exempt from the financial promotions regime. This exemption was removed when the UK left the European Union. “We see no reason why different standards should apply to a search engine or social media compared to a newspaper”, Mr Rathi stressed.
If these platforms choose to display and profit from adverts for risky – and in some cases fraudulent – investments, they should also comply with financial promotions rules, he argued, adding that the same standards should apply to a search engine or social media as to a newspaper.
The influence these platforms have on investors is growing, especially with newer self-directed investors. Compared with more experienced investors, those with less than three years’ experience are more than twice as likely to rely on YouTube or social media for research or finding investment opportunities, FCA’s chief noted. Amongst that same group, only 2 in 5 believe that losing some of the money they invest is a genuine risk.
“We’re looking at how social media platforms are adapting to these new rules. If needed, we will take action”, the FCA CEO said.
Let’s recall that earlier in April the FCA posted its financial promotions data for Q1 2021. This data shows the number of financial promotions that have been amended or withdrawn due to non-compliance with FCA rules.
The regulator explains that it undertakes many reviews of firms’ financial promotions, which are identified through multiple sources including both consumer and firm referrals. The FCA looks at every financial advert reported to it.
In Q1 of 2021, the FCA reviewed 441 financial promotions, which includes promotions identified through both complaints the FCA has received and the proactive work it performs to ensure promotions meet the requirements of its rules, including that they are fair, clear and not misleading.
During this time 38 cases resulted in 105 promotions being amended or withdrawn through FCA’s interaction with authorised firms.