Although the Financial Services Bill is still going through the House of Lords, in less than nine months time the demise of the FSA will be complete. Its replacements, the PRA (Prudential Regulatory Authority) and the FCA (Financial Conduct Authority) have issued guidelines on their approach, but their current lack of detail on financial promotions has left many firms confused about the future.
The biggest initial change I think we are going to see is not new guidelines, but a stricter enforcement of the current ones with heavier fines for those that stretch the mark. One of the contentious issues around this is the proposed public “early warning” notices of firms that do not comply and the cutting of the right to reply from 28 to just 14 days.
The FCA guidelines state: The government intends that the FCA will have new powers in product intervention; to direct firms to withdraw or amend mis-leading financial promotions with immediate effect; and to publish the fact that a warning notice in relation to a disciplinary matter has been issued.
Besides the problem of drawing adverse attention to a potentially innocent firm, there are other issues to consider. Retrieving the evidence of a print or email-based marketing campaign to argue your case is relatively easy, but trying to collate proof around a social media campaign that’s taken place over several different platforms is time-consuming without an adequate contextual archive.
14 days is a long time if warning notices are issued and waiting that long to demonstrate publicly that it was within the regulation is not really an option for a firm looking at damage limitation and protecting its reputation. A successful, or indeed notorious, social media campaign that’s been running for just a week can produce a vast amount of content that will need to be reviewed. But working out who said what, who saw what, whether they were public messages or private DMs takes time if you’re doing it manually or using disparate databases. Not to mention the additional headache if the campaign actually ended months before.
In addition, the PRA outlines that it may even intervene in a financial institution’s business, citing the Japanese Financial Services Agency that in 2009 banned the retail division of a large financial institution from advertising and running sales campaigns for one month after it failed to maintain required standards to control money laundering.
We’ll have to wait until October when the House of Lords meets again to discuss the Financial Services Bill to see if the early warning notices will remain, but either way there are several things firms can do now in preparation for the final transition.
Review your risk within the current FSA guidelines, amended your policies and procedures if you find them lacking and starting thinking about using technology not just to enforce them, but to help you understand the situation and react quickly if something does go wrong. Even better, put a strategy in place that allows for real-time monitoring, compliant logging and archiving and content control that means that even if audited, you know you are safe when using Social Media as part of a marketing portfolio. The cost of implementing such an approach will always be significantly lower than the potential penalties for not doing so.