The document discusses social media advertising pitfalls for UK financial services firms. It summarizes that (1) financial promotions rules apply to communications through social media similarly to other forms of advertising, (2) simply labeling a communication "non-advertising" does not exempt it from financial promotion rules, and (3) communications must comply with all relevant rules around clarity, fairness, and avoiding misrepresentation.

1. When is a Non-Advert an Advert?
Social Media Advertising Pitfalls For UK
Financial Services Firms
Firms cannot assume that because a communication is made using new
media, it is an image advertisement and exempt from the financial
promotion rules.
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30 June 2010 Lee Werrell
CEI Compliance Limited

2. When is a Non-Advert, an Advert?
Introduction
The FSA have warned that Financial services firms should pay particular attention to their
various social networking and other internet communications including iPhone apps to
make sure that they stay up to date and compliant with the FSA handbooks.
Problem
The FSA has studied the way that financial services companies communicate to the public
and has found that some of communication through the new social media channels lacks
compliance with its safeguards.
The Rules
Financial Promotions rules are clearly provided in Conduct of Business Sourcebook
(COBS) Chapter 4 and firms must apply all the strict advertising rules their formal
communications are subject to, strangely enough, use of Twitter, Facebook, networking
sites or message boards.
So what is Image Advertising?
Firms cannot assume that because a communication is made using new media, it is an
image advertisement and exempt from the financial promotion rules. An image
advertisement only consists of the name of the firm, a logo or other image associated with
the firm, a contact point and a reference to the types of regulated activities provided by the
firm or to its fees or commissions. When a communication goes beyond the definition of
image advertising, no matter how well intentioned or innocent it may seem, it will need to
comply with all of the relevant financial promotions rules.
The treatment of image advertising varies depending on which sourcebook applies.
CEI Solutions
Solution 1
Ensure that whenever you advertise on any other “new media” communication channel,
make sure that you do not include anything other than “image” advertising content.
Solution 2
If you are going to post anything on a message board or Networking Site page, ensure that
it fulfills the requirements of the FSA. See COBS 4, MCOBS 3 and don’t forget ICOBS
contains no exceptions for image advertising. Also the new rules for websites from the OFT
need to be considered as they have the power to shut the site down if it infringes any rule.

3. Solution 3
If in doubt call us on 0800 6899689 to look into your campaign and the impact of
the regulations
Summary
The safest way of using the new media is to ensure you apply the specific financial
promotions rules with the fundamental starting point of clear, fair and not misleading.
The FSA call this “stand-alone compliance”. This describes their expectation that every
financial promotion must comply with all of the relevant financial promotions rules. It is not
acceptable, for example, for any firm or individual to purposely omit important risk
information just because they intend to give it later in the specific sales process.
What you have to consider about your financial promotion is COBS 4.2.2, which states "in
a way that is appropriate and proportionate taking into account the means of
communication and the information the communication is intended to convey".
It is unclear if you were to state your company name on a tweet in Twitter and added a link
to your company website whether this would be image advertising or a standalone financial
promotion using all 140 characters of that medium. It is unlikely that the FSA would be
particularly stringent or prescriptive in that area.
So whatever medium you use to spread the word you need to consider the financial
promotions rules in most cases as they apply to your discipline. The FSA are continuing to
review and assess adverts across all media types and categories. However the message is
clear from the regulator that they will take action against any firms that fail to produce
stand-alone compliant financial promotions picked up through their monitoring or thematic
reviews.
For the FSA Publication, please click here.
For a description of “Stand Alone Compliance” please click here.
CEI is a financial services compliance specialist company helping all sizes of
firm; from IFAs to Investment banks, with their regulatory requirements and
compliance challenges.
For help with any of your compliance issues, please call
0800 689 9 689

4. Companies we have been involved with in the last 11 years;
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reducing
required management time, ensuring all areas are up to date and working
for your firm’s long term benefit. Call 0800 689 9 689 today or go
online at
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This whitepaper was written
by Lee Werrell FInstSMM Chartered MCSI
Cert PFS, founder of CEI Compliance Limited.
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