25th June 2010

Big brother is watching you

Twitter, Facebook, LinkedIn, iPhone apps, forums, blogs- what do they have in common?

Simple really and of course "soooo" obvious. The FSA has issued an Industry Update no 5, June 2010 warning that firms must comply with financial promotion rules when using new media such as Twitter, Facebook, online forums, blogs and I Phone applications.

In this industry update, the FSA says some new media promotions it reviewed lacked risk warnings and others went beyond the definition of "image advertising" or did not comply with financial promotion rules.

The FSA says "image advertisements" should consist only 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".

Any communication that goes beyond that definition must comply with the financial promotion rules.

The FSA document says: "Where our rules apply, they generally apply in a way that is media-neutral, and they focus on the content of the financial promotion rather than the medium used to communicate it. Therefore, applying the rules to financial promotions made using new media is no different to financial promotions made using any other medium."

Their review in early February of some 30 Twitter and Facebook pages and online forums found good and poor practice amongst firms.

The review found that "Some promotions lacked risk warnings. Other promotions, while not very specific about products or services, nevertheless went beyond the definition of image advertising. Firms may not have considered these factors to meet the definition of a financial promotion and therefore have not applied the relevant communication rules."

The FSA recommends, "It is important to consider whether this channel is a suitable method for the type of communication. For example, Twitter limits the number of characters that can be used, which may be insufficient to provide balanced and sufficient information".

At Panacea we have always agreed that rules based regulation is very important, but we also feel that regulation should not create costs for costs sake or regulation for regulation sake. IFAs would like to concentrate on what they do best, which is to spend as much time as possible in advising their clients in a cost efficient way.

Many IFAs see this as yet another "jobsworth" example of a step toward regulation for regulation sake. To suggest that anyone would buy a product based upon a 140-character tweet is frankly laughable and I think this is a case of someone having a little too much free time on their hands that they have to fill.

Here are some views of IFAs who seem to have a similar view and once again mostly anonymous for fear of reprisals I assume.

• It must be so nice to be on a £100,000 salary & have nothing better to do!- Anon
• Typical, the economy is melting down around around our ears and the main cause of the disaster, (who fell asleep on their watch) is focused on beating up a Facebook user and wittering on about a twitter page. anon
• I would suggest that the arm of the FSA reaches out to Bill Gates & Co - perhaps we will see FSA approved versions of windows. Does Financial Promotions extend to special offers for rebated at McDonalds, perhaps the favoured food for the FSA? We could all be wearing FSA approved suits from M & S once their financial promotions have been readily approved. In fact, if the FSA became a public company and issued shares on the worlds exchanges, this could bring a new meaning to insider dealing... Martyn Sinclair
• LOL 140 characters allowed - not 9,000,000 words! Anon
• The guys at Canary Wharf must be really, really bored! Get a grip FSA and do something useful for a change! Pensionman
• Interesting article. Twitter, Facebook and online forums are normally used casually, for time wasting, or for social purposes. In business they can help keep you 'front of mind', or with the exchange of opinion or points users consider helpful. Are they really used for financial promotions? What client would consider a tweet legally binding? Then there's enforcement, does the FSA have resources to spare to sift through mountains of chatter in the hope of finding something incriminating? Or the resources to dispute the technical side of things when the offender simply deletes the problem posting? anon
• Perhaps the warning should be something like "The Financial Services Authority is run by an obscene number of grossly overpaid, bumbling idiots and will damage your wealth" It has cost you 3.5 Billion pounds to date and counting. anon

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