TikTok has become a focal point in the United Kingdom as the country’s financial watchdog takes action against potential consumer harm.
The Financial Conduct Authority (FCA) has recently initiated a consultation process to revamp its social media guidelines, specifically targeting influencers and advertisements that could negatively impact consumers.
This move by the FCA comes as a response to the growing influence of so-called “finfluencers” and the rising popularity of TikTok and social media platforms where financial promotions have gained significant attention.
Recognizing the need to adapt and modernize its guidelines, the FCA seeks to address the potential risks posed by these online non-compliant practices.
TikTok, Other SocMed Face Scrutiny Over Crypto Promotions
Lucy Castledine, the director of consumer investments at the FCA, expressed the agency’s concerns, stating that numerous ads on TikTok have fallen short of the existing guidance designed to safeguard consumers.
Social media users who rely on these platforms for financial decision-making are particularly vulnerable, as they are more likely to come across misleading promotions, ultimately causing harm.
The consultation, spanning various financial services sectors, will be in effect for the next eight weeks. Additionally, the FCA’s engagement with the industry has yielded positive outcomes, resulting in significant changes to the advertising policies of major technology companies.
Too many people across the UK are being shown financial promotions from unsuitable sources.
We’ll be ramping up our work to stamp out illegal financial promotions, particularly those found on social media. #financialpromotions #financialservices https://t.co/sK8r5ExxVm
— Financial Conduct Authority (@TheFCA) July 17, 2023
These companies will now restrict financial promotions to those approved by firms authorized by the FCA, aligning their practices with the regulator’s objectives.
Identifying Misleading Ads And Inadequate Risk Disclosures
The regulator has specifically identified instances where adverts mislead or confuse consumers by failing to disclose the potential risks associated with financial products adequately.
For example, the FCA has flagged cases where TikTok users promote debt counseling without providing sufficient information about the risks involved.
Similarly, an Instagram advertisement promoting “buy-now-pay-later” schemes has been identified as lacking proper disclosure of the dangers of using unregulated credit.
The FCA has also expressed concern over using memes in advertisements, particularly within the crypto sector, which has gained significant traction on social media platforms.
Users often remain unaware that these memes are subject to the FCA’s regulations, potentially exposing themselves to misleading or non-compliant information.
By drawing attention to these issues, the FCA aims to address the potential harm caused by misleading TikTok and crypto advertisements, inadequate risk disclosures, and the accidental circulation of non-compliant promotions on social media.
Castledine said:
“We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online.”
“And for those touting products illegally, we will be taking action against you,” she added.
Featured image from Rafael Henrique | Sopa Images | Lightrocket | Getty Images
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