Communicating with investors
6.1 Financial promotions and marketing communications
Financial promotions and marketing communications may be communicated by means of:
Your crowdfunding platform
Product brochures and sales aids
General advertising in magazines, newspapers, radio, television and websites
Mail shots, whether by post or email
Written correspondence, telephone calls and face-to-face discussions
Presentations to groups of individuals
Social networking websites, such as LinkedIn, Twitter and Facebook, as well as forums, blogs and smartphone applications, including WhatsApp and Messenger
Other publications which may contain non-personal recommendations
Financial promotion rules are media neutral. This means the rules focus on the content of the financial promotion rather than the medium used to communicate it. Social media posts or text messages are subject to the exact same rules as a website, an offering memorandum, or a product brochure. The communications rules can be found within FCA Handbook COBS 4.
6.1.1. Types of Financial Promotion
There are two types of financial promotion: 'real time' and 'non-real time'. A real time promotion is one which is communicated in the course of a personal visit, telephone conversation or other interactive dialogue, such as Skype, WebEx or live online chat. A non-real time financial promotion is made in identical terms, generally to more than one person, by letter, email or contained in a newspaper, journal, magazine, other periodical publication, website, television, radio programme, or posted through social media.
Furthermore, a non-real time financial promotion must be made or directed by way of a system which in the normal course:
Creates a record of the financial promotion which can be made available to the recipient at a later time.
Does not require the recipient to respond to it immediately.
The FCA have clarified that text messages and social media posts, such as tweets or Facebook comments, are non-real time promotions and therefore subject to more stringent approval and recordkeeping requirements.
Non-real time financial promotions issued or caused to be issued in the UK must be issued by or approved by a person authorised under the FCA. Any investment agreements arising from a promotion not so issued or approved may be unenforceable.
At ShareIn and with respect of its Appointed Representatives, all advertisements and marketing material we issue should be approved, prior to use, by the compliance team.
On rare occasions, the timescale may be such that prior approval is impractical. As an exception to the rule, the compliance officer or his/her alternate must oversee the preparation of the material and post approval must be obtained. If the post-approval process establishes any errors in the advertisement, then unfair or misleading errors must be corrected in writing to the person(s) to whom it was issued.
A copy of the approved material must be held in the advertising/marketing Trello board. Such material must be clearly dated and signed off by the compliance officer.
6.1.3. Fair, Clear and Not Misleading
In general terms, when providing information to clients, we must ensure such information:
Includes the name of our firm and regulatory status
Is accurate and in particular does not emphasise any potential benefits of relevant business or a relevant investment without also giving fair and equally prominent indication of any relevant risks.
Is sufficient for, and presented in a way that is likely to be understood by, the average member of the group to whom it is directed, or by whom it is likely to be received.
Does not disguise, diminish or obscure important items, statements or warnings.
When a financial promotion is issued, appropriate expertise must be applied, and we must ensure that the material is fair, clear and not misleading.
Any communication of any kind to a person that promotes the investment business must also be fair, clear and not misleading.
In meeting the fair, clear and not misleading requirement, it is essential we ensure a financial promotion:
For a product or service that places a client's capital at risk makes this clear.
That quotes a yield figure gives a balanced impression of both the short- and long-term prospects for the investment.
That promotes an investment or service whose charging structure is complex, or in relation to which we will receive more than one element of remuneration, includes the information necessary to ensure that it is fair, clear and not misleading. It must also contain sufficient information whilst taking into account the needs of the recipients.
That names the FCA as its regulator and refers to matters not regulated by the FCA makes clear that those matters are not regulated by the FCA.
That offers packaged products or stakeholder products not produced by us, gives a fair, clear and not misleading impression of the producer of the product or the manager of the underlying investments.
6.1.4. Compensation Information
We must ensure that any reference in advertising to an investor compensation scheme established under the Investor Compensation Directive is limited to a factual reference to the scheme. ShareIn websites are required to include a warning that investments are not covered by the Financial Services Compensation Scheme (FSCS).
6.1.5. Comparative and Consistent Information
If the financial promotion compares relevant business, relevant investments or persons who carry on relevant business, we must ensure:
Such comparisons are meaningful and presented in a fair and balanced way.
The sources of the information used for the comparison are specified as well as including the key facts and assumptions used to make the comparison.
The information contained in the financial promotion is consistent with any information we provide to a client in the normal course of carrying on designated investment business.
Generally speaking it will not be possible to compare the potential returns of an investment made on a crowdfunding platform with those on an interest-bearing savings account benefitting from FSCS protection.
6.1.6. Tax Treatment
If the financial promotion refers to a particular tax treatment, we must ensure it prominently states that the tax treatment depends on the individual circumstances of each client and may be subject to change in future.
6.1.7. Past Performance
That indication is not the most prominent feature of the communication.
Appropriate performance information is included which covers at least the immediately preceding five years, or the whole period for which the investment has been offered, the financial index has been established, or the service has been provided if less than five years, or such longer period as we may decide. In addition, in every case that performance information must be based on and show complete 12-month periods.
The reference period and the source of information are clearly stated.
The information contains a prominent warning that the figures refer to the past and that past performance is not a reliable indicator of future results.
If the indication relies on figures denominated in a currency other than that of the EEA state in which the retail client is resident, the currency is clearly stated, together with a warning that the return may increase or decrease as a result of currency fluctuations.
If the indication is based on gross performance, the effect of commissions, fees or other charges is disclosed.
Given the early-stage nature of most ShareIn Appointed Representatives, we expect it would be unusual to present past performance data in most cases.
6.1.8. Simulated Past Performance
Given the types of investments on our platforms, ShareIn do not anticipate a situation where displaying simulated past performance would be acceptable.
In the rare event where such a display could be deemed relevant, we will refer to rules found in COBS 4.6.6.
6.1.9. Future Performance
It is not based on and does not refer to simulated past performance.
It is based on reasonable assumptions supported by objective data.
It discloses the effect of commissions, fees or other charges.
It contains a prominent warning that such forecasts are not a reliable indicator of future performance.
It is based on performance scenarios in different market conditions (both positive and negative) and should reflect the nature and risks of the specific types of instruments included in the analysis.
6.1.10. Costs and Charges
Investors must understand before making an investment how costs or fees will impact the returns they can expect.
Ex-Ante disclosure of aggregated expected costs for proposed investment services and financial instruments to be provided in good time before a client makes an investment decision
When calculating costs and charges on an Ex-Ante basis, investment firms shall base these on costs which have actually been incurred as a proxy for the expected costs and charges. Where actual costs are not available, the investment firm shall make reasonable estimations of these costs.
Ex-Post disclosure of aggregated costs which have actually been incurred for investment services and financial instruments, must be provided to each client annually on a personalised basis
In both the Ex-Ante and Ex-Post disclosure cases, costs should be aggregated and expressed as a monetary amount and a percentage. Third party payments received are to be shown separately.
In both the Ex-Ante and Ex-post disclosure cases, an illustration showing the cumulative impact of costs on the investment return should also be included along with any anticipated spikes or fluctuations and a description of the illustration.
Where any part of the total costs and charges is to be paid in or represents an amount of foreign currency, investment firms shall provide an indication of the currency involved and the applicable currency conversion rates and costs.
6.2. Social Media and the Internet
The FCA has strict requirements regarding the promotion of investment products and services, including on social media. The FCA rules apply to all communications made by you in your capacity as a member of staff or which in any way relate to your services and products.
All communications made using social media which promote your services, or any products can only be made by FCA approved persons. They must also have been through our formal compliance approval process. ShareIn keep a record of all approved significant communications on the advertising/marketing Trello board.
Unless the foregoing has been followed, you must not make any communication using social media that promotes your services or any products. This means that broadly you must not:
- Recommend, advise, discuss, promote or mention any specific investments or products
- Discuss or recommend your investment services
- Invite or encourage any client or potential client to contact you in order to do either of the above
whether via your own website, any external website or internet forum, or any of the many social media platforms.
Note that the FCA have given feedback about some social media services and the appropriate types of messages for each. It is essential that you weigh up the limitations as well as the possibilities of each social media platform you might be considering. You may only publish promotional material that is in line with the audience and constraints of the medium.
Any breach of these restrictions may amount to gross misconduct.
If you are in any doubt as to what you can and cannot say using social media, then please contact Compliance.
Note that information contained in your website is likely to fall within the FCA definition of 'an investment advertisement'. Accordingly, your investment platform and any material considered for internet use must be viewed and, where appropriate, approved in advance by Compliance.
6.3 Other sales and marketing activities
6.3.1. Cold Calling
We will not, in the normal course of business, make any cold calls to any clients or potential clients. Please remember that any unsolicited approach in connection with designated investment business activities, whether by telephone, social media or in person, constitutes a cold call.
6.3.2. Telephone and meeting recording
Under the latest regulatory framework, you are required to make a recording of conversations that could lead to a transaction in an investment. This includes telephone calls via landline, company or personal mobile phones, voice over internet services such as Skype, or conference or video conferencing solutions, including WebEx or Zoom. In person meetings must be minuted, and all eligible conversations must be recordkept in a durable medium for five years.
Any conversation that provides more information about products available on the investment platform is in scope. To determine whether a recording solution must be put in place, audit your communication patterns and document under what circumstances you speak to potential investors, and if you provide any information that could lead them to make an investment decision; exactly who in the firm would be in a position to give this type of information; and what telephones or other communication systems are used.
Keep in mind that before recording any conversation, you must inform the other party or parties that the call is being recorded in satisfaction of a regulatory obligation. To comply with the GDPR data minimisation principle, it is recommended that you record and keep only those calls that are in scope as described above.