Freetrade, a UK-based financial technology company offering freemium share dealing services received an order to remove all misleading promotional campaigns on social media.
The Financial Conduct Authority (FCA) highlighted several promotional campaigns which violate (COBS) Conduct of Business Sourcebook rules that enhance consumer protection through fair and clear communication. Despite an appeal by the firm, the watchdog ordered Freetrade to remove all paid-for sponsored influencer advertisements and posts across all social media, including Instagram, TikTok, Facebook, and Youtube.
To show compliance with this directive, Freetrade should release a file of all advertisements and posts removed. This action is carried out as a way to regulate online advertising and impose transparency measures on platforms’ algorithms.
A video posted to an Instagram story on the influencer’s profile promoted the benefits of using Freetrade to take part in investment business but did not disclose the expected risks. The influencer claimed to have cleared £14,000 of debt in 18 weeks.
FCA ruled that; “The Authority considers this to be misleading as there are no guarantees that any investment will result in positive gains in the short or long term. Consumers already in debt are likely to be particularly vulnerable to this.”
Freetrade spokesperson said, “We are committed to upholding the highest standards, ensuring that we act in the best interests of our customers and treat them fairly.”
Freetrade, founded in 2016 has over one million registered traders with over £1 billion of assets under administration.
Ads Clampdown
FCA scrutiny on Freetrade started early in 2020. The decision to launch sanctions rose after the firm was warned about its misleading advertisements that did not cease. Freetrade took an action to prevent further breaches, including hiring a financial promotions specialist and sending a senior member of staff on a day course in social media, and unfortunately, the error reappeared.
In the current crackdown on misleading financial advertising, the FCA withdrew 295 non-compliant ads in the last quarter of 2021. Of the 295 promotions, 77% were posted on the website and social media.
In a statement, FCA said, “The further breaches of related financial promotion rules indicate to the Authority that the Firm did not adequately amend its approach to approving and issuing financial promotions when it conducted its internal reviews. The previous breaches related to financial promotions originated and communicated by the Firm, and the Authority considers that the financial promotions communicated by paid for or sponsored influencers also breach the financial promotion rules.”
Two years since joining FCA as Chief executive, Nikhil Rathi has taken a vital stance on the role social media has played in promoting sometimes fraudulent, risky investments to the misinformed consumer.
