Copylab Meets: Fintech Lawyer Lucy Frew On How Financial Firms Can Deal With Social Media

Social media is a field that both excites and exasperates marketers working in investment management. The Financial Conduct Authority (FCA) released generally well-received guidelines on social media use late last year, but the rules have prompted a great deal of debate on how they work in practice, and how marketers should behave when working with platforms such as Twitter and LinkedIn.

I sat down with Lucy Frew – who works as head of financial regulatory at Kemp Little, a law firm specialising in technology and digital – to find out her views on where we are with social-media regulation, and what marketers can do to make the most of it – and avoid the pitfalls.

Lucy Frew

Q: How would you summarise the regulatory environment for social media now?

A: I think the FCA’s social-media guidance is very good compared with some other, less practical, guidance. I think it gets the balance about right in terms of how specific it is; it recognises that this is a field that’s fast-moving and that the more precise the regulation is, the more out of date it will become. There’s also the question of just how inflexible firms would want regulation to be. The FCA is right in giving firms some leeway in terms of how they apply regulations to their own business model, given how different businesses can be. Overall, I think the guidance is relatively clear, helpful and concise. It should not be too difficult for people to get their heads around.

Q: As we saw during your presentation, there are many instances where marketers are unclear on what they should and shouldn’t do on social media. What would you say to marketers who are struggling to know if what they want to do is permissible or not?

A: The FCA does expect firms to take responsibility for applying its rules and guidance. So, in practice, people are unlikely to get the FCA to sanction a particular approach in social media, beyond what is stated in the written rules and guidance. They can get advice from their lawyers in order to gain some reassurance if they are operating in a grey area. Then, if the FCA comes calling further down the line, a firm will be in a much stronger position to say that it seriously considered its approach, took advice, and proceeded on the basis of that advice. While it cannot cover every scenario, you might be able to extrapolate from the FCA guidance. One must recognise that it is difficult for any regulator to cover every situation and scenario, especially in such a fast-moving area as social media.

Q: Have you seen companies falling foul of the FCA regulations? If so, what tends to cause it?

A: In terms of financial promotions, one of the areas the FCA is keeping a close eye on is whether firms’ marketing properly balances the risks of a product or service against its benefits. It’s not just a binary issue of putting disclaimers in or not – it can be a subjective call about whether you’re doing enough given the context and likely audience. Often within a company there might be tension between the legal side and the business, with the latter naturally wanting to promote the product and unhappy about including potentially off-putting risk warnings. This is especially the case when promotions are being seen by the retail public, and when character limits in social media make it difficult to observe compliance.

Regarding enforcement actions, it’s relatively early days for financial-sector use of social media, and the FCA is undertaking ongoing reviews into different aspects of communications in various contexts. Two examples would be peer-to-peer lenders and crowdfunding, sectors where the FCA has already looked into their promotions. Many of these more innovative and technology-driven businesses are likely to be more active on social media, yet potentially less likely to be familiar with the FCA rules than those from traditional financial-services backgrounds − so they need to be particularly mindful of understanding the FCA financial promotions regime.

Q: What are the key risks that marketers have to look out for with social media?

A: Excessive product push is a big one. Also, if in-house marketers are using an external PR or marketing agency, they need to be sure that those firms are also aware of the rules. They also need to ensure awareness of the rules within their own company. It’s really important that staff get proper training in social-media policies, because there’s generally a grey area surrounding when people can use their personal social media accounts to say things about their employer or its products on Facebook, Twitter or whatever. Often, they think they’re doing their employer a favour by saying something positive, but don’t realise that by doing so, they’re straying into making financial promotions and may be subject to financial-promotions restrictions. They need to know the parameters. Some firms choose to establish strict policies that simply prohibit employees from referring to the firm or its products on their personal social-media accounts.

Q: What misconceptions do you encounter about the use of social media?

A: Some companies are very wary of social media and believe they can’t use it at all. In fact, any company should be able to use social media without breaching the rules, as even those whose products can’t be promoted to the general public can still use social media in a more generic way to build their brand. At the other end of the spectrum, there are some firms that don’t understand that the use of social media is within the remit of the financial promotions rules at all. It can be quite counterintuitive to think that a tweet is connected to the dry world of financial regulation, but the fact is that the rules are media-neutral and apply to tweets and Facebook pages just as they do to, say, investment fund prospectuses.

Q: Is it advisable just to avoid using social media for financial promotions altogether?

A: Firms that aren’t allowed to market their products to retail customers at all need to be the most careful about the use of social media. It can still be a good tool in terms of building brand awareness but not, for those firms, for promoting products. But for companies that have no prohibitions on selling to retail customers, there’s no reason why they shouldn’t consider using social media for promotions, provided they are informed and careful in their approach.

Q: A popular view has it that compliance in social media, as it did with “bring your own device”, follows a path of outright prohibition, partial permission, and finally acceptance along with a compliance regime that raises a red flag as soon as issues arise, rather than requiring everything to be signed off in advance. Is this where you see it headed with social media?

A: Regulators will not tolerate an approach where a firm allows communications to be made and then pulled if not compliant. Making a prohibited financial promotion in the first place is the breach, irrespective of what, if any, effect it has, so the idea that the FCA would endorse an approach of pulling non-compliant material after it’s gone out would be entirely inconsistent with the rules.

Give that social media is so fast-paced, compliance procedures requiring prior sign-off can mean missing the moment. If companies want to run social media accounts and allow staff communications to go out without being signed off, they can choose to do so but will need to understand that this exposes them to higher risk and should make absolutely certain that their staff are fully trained on what the rules are. Companies may wish to allow a select group of trained and media-aware staff to use social media for business communications.

Q: What changes have you seen over the last few years in terms of attitudes towards the use of social media?

A: It’s really interesting the way we see some firms really embracing it and using it well, and others still being quite reluctant. And that reluctance can come from different sources: sometimes it’ll be senior management that’s more wary, and that might be a generational thing. But then sometimes firms have very forward-looking senior management who make it their responsibility to see what’s going on in the market, and they’re very, very interested in how they position their brand. Every firm is different and there’s no common approach, but overall there’s definitely an increasing trend towards social media, and it’s only likely to increase.

Q: What’s your view on where social media and compliance are headed?

A: I think there’s going to be increasing take-up among firms, and with that there’s going to be less risk as people become more familiar with it and the pitfalls. There are bound to be regulatory investigations and there will be some firms that get it wrong, as in any other area. But provided it’s not a large-scale failing that affects hundreds or thousands of consumers, along the lines of the mis-selling cases which occur, it can actually be quite helpful to the sector generally if there are occasional investigations. These assist understanding of what the regulators’ expectations are and tend to help keep the sector as a whole compliant. In general, case law is a good way of finding out what the FCA’s thinking is.

Q: What five key pieces of advice would you give to a finance company using or looking to use social media?


  1. Be clear about your rationale for using, or not using, social media and what your objectives are.
  2. Set out the firm’s social-media strategy in a dedicated social-media policy. Ideally, the firm’s senior management should take the lead in developing and maintaining the policy. Monitor new developments in the social-media sector and adapt the policy accordingly.
  3. Establish procedures that make it clear who in the business is allowed to post on social media. Consider appointing an appropriate person to be in charge of signing off on all social-media communications. Have checklists in place for staff to follow.
  4. Have documented procedures and evidence of compliance with them in place and keep a record of everything which is posted, who posted it and when. Ensure you can demonstrate, if required, that your approach was compliant to minimise regulatory, reputational and litigation risk. It won’t matter if you had great awareness and systems in practice if you can’t prove it.
  5. Incorporate social-media awareness into regular staff training sessions.