UK Watchdog Proposes Applying ‘Consumer Duty’ to Social Media

Britain’s financial watchdog on Monday proposed toughening up safeguards against the illegal marketing of financial products on social media by applying a stringent “consumer duty” that is being rolled out to banks, funds and insurers on July 31.

The Financial Conduct Authority has said its new duty will be a step change in protecting retail investors after years of mis-selling scandals, by forcing firms to demonstrate how they are giving consumer good outcomes.

“Where applicable, the Consumer Duty will raise our expectations of firms communicating financial promotions on social media above the requirement… to be ‘clear, fair and not misleading’,” the FCA said in proposals out to public consultation.

“Firms advertising using social media must consider how their marketing strategies align with acting to deliver good outcomes for retail customers.”

In the fourth quarter of last year, nearly 70% of amended or withdrawn financial marketing following FCA intervention involved a promotion on websites or social media, the FCA said.

The watchdog is targeting so-called ‘finfluencers’ or widely followed people on social media who promote financial products.

“Consumers exhibit high levels of trust in finfluencers, but their advice can often be misleading,” the FCA said.

“Promoting a regulated financial product or service without approval of an FCA authorized person, or providing financial advice without FCA authorisation, may be a criminal offense.”

Promotions should also include risk warnings, it added.

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