The Financial Conduct Authority (FCA) took action on July 17, issuing proposed guidance to regulate financial promotions on social media. This move will mainly focus on promotional memes and financial influencers, often called “finfluencers”.
FCA has observed the increasing popularity of cryptocurrencies and investment products actively promoted online. Crypto firms have been circulating memes online. Many unaware are subject to the promotional rules of the Financial Conduct Authority (FCA).
The FCA pointed out that promotional memes are prevalent in the crypto sector. Any form of communication could be deemed a financial promotion. Hence, the proposal intends to update current financial promotion guidelines and target social media platforms, like YouTube, Discord, and Twitter. The proposed guidance is currently open for public comments until September 11.
UK’s FCA has stressed that these promotions are aimed explicitly at younger consumers. Consequently, the guidance stresses giving customers the correct information appropriately. It must also be available in an easily understandable manner to assist them in making sound decisions.
Lucy Castledine, FCA’s Director of Consumer Investments, voiced her concerns regarding the numerous non-compliant ads. She warned that the authority would take action against those who promote products illegally.
The authority has warned influencers whose endorsements might lead to potential offences. These crimes are punishable by a maximum of two years in prison, an unrestricted monetary penalty, or both. This law applies even to endorsements originating outside the U.K. but can impact the country.
The warning was prompted by a report highlighting that more than 60% of individuals aged 18 to 29 follow social media influencers. Approximately three-quarters of them express trust in the influencers’ recommendations.
The Advertising Standards Authority has collaborated with the FCA to educate consumers and influencers about financial product promotion risks. They have utilized infographics, roundtable discussions, and live events to raise awareness of potential harm.
Following the recent announcement of new advertising regulations for crypto firms targeting UK consumers, the FCA has initiated a consultation process. Effective from October 8, 2023, the FCA will prohibit incentives to invest in crypto, including ‘refer a friend’ bonuses.
Additionally, firms must introduce explicit risk warnings and a 24-hour cooling-off period to allow first-time investors adequate time to consider their investment decisions. These measures align with the existing framework in place for other high-risk investments.