There is an increasing global trend for financial institutions to build brand identity and market their services and products via different social media outlets such as Facebook, YouTube, Twitter and LinkedIn. In Hong Kong, the Securities and Futures Commission (SFC) regulates the marketing and advertising of financial products under the Securities and Futures Ordinance and its subsidiary legislation. However, the issues arising from the marketing of financial products using social media are not specifically addressed.
Has the SFC issued any specific guidance on social media?
In short, no. The SFC issued a Guidance Note on Internet Regulation in March 1999 (Guidance Note) which makes it clear that advertising / marketing regulation in Hong Kong applies irrespective of the medium of communication or delivery, whether it is paper-based or electronic, and that the issue is whether such communication is aimed at investors in Hong Kong or is detrimental to the interests of the investing public in Hong Kong.
In assessing whether electronic communications may be aimed at investors in Hong Kong, some of the following factors may be taken into account:
The Guidance Note, available via the link below, also sets out additional operational measures which the SFC expects intermediaries to comply with when conducting business over the internet:
In April 2003, the SFC issued the Collective Investment Schemes Internet Guidance Note, which mentions that internet “banners” which amount to product advertisements require SFC authorisation.
As social media facilitate marketing over the internet, these two guidance notes should be considered in any social media marketing of financial products.
Are there any general social media laws in Hong Kong?
No. However, the following laws, although not specifically related to social media, will apply to the use of social media:
(i) Intellectual Property Laws
Intellectual property laws include the Copyright Ordinance and the Trade Marks Ordinance, as well as the common law tort of passing off. Generally, like the Guidance Note, these Hong Kong laws only apply in respect of unlawful acts committed in Hong Kong. All relevant factors will be taken into consideration in determining whether the relevant act was done in Hong Kong, including whether the advertisement is aimed at or intended for Hong Kong consumers, the language of the advertisement and whether the products and / or services offered in the advertisement are supplied to consumers in Hong Kong.
(ii) Misrepresentation and Defamation
The content of an advertisement (generally or in social media) is subject to the law of misrepresentation in Hong Kong. A misrepresentation is a false statement of fact which is relied on by the person to whom the statement is made when entering into a contract or a legally binding transaction. An entity may also be liable under defamation laws in Hong Kong for publishing or authorising the publishing of or distributing defamatory marketing material via social media outlets.
(iii) Consumer Protection
The Trade Descriptions Ordinance prohibits the application of false trademarks, false trade descriptions in respect of goods and services, misleading omissions, aggressive commercial practices, bait advertising and bait-and-switch tactics. However, products and services supplied and regulated under the Securities and Futures Ordinance, the Banking Ordinance, the Insurance Companies Ordinance and the Mandatory Provident Fund Schemes Ordinance will be excluded from the operation of this ordinance once the Trade Descriptions (Unfair Trade Practices) (Amendment) Ordinance 2012 comes into effect.
(iv) Trade Promotion
Companies which intend to promote, organise, conduct or manage competitions or other similar projects to promote their business or products are subject to the requirements of the Gambling Ordinance in Hong Kong. Accordingly, it is necessary to obtain a Trade Promotion Competition Licence in order to organise and conduct a trade promotion competition in Hong Kong.
(v) Guidelines and Manuals
The Hong Kong Consumer Council and the Association of Accredited Advertising Agencies of Hong Kong have issued guidelines and best practice manuals. Please refer to the below links for further information.
(vi) Unsolicited Commercial Electronic Messages
In Hong Kong, the sending of commercial electronic messages with a “Hong Kong link” is regulated under the Unsolicited Electronic Messages Ordinance. Therefore, if the sender or the recipient of a commercial electronic message is located in Hong Kong, the Ordinance will apply. As the Ordinance is quite complex, a Code of Practice has been issued by the Office of the Communications Authority.
Do the existing financial product marketing regulations apply to social media?
Yes. The SFC has stated that the provisions of the Securities and Futures Ordinance relating to the advertisement, offering and dealing in funds apply equally to activities conducted over the internet. Thus, the sending of marketing materials over the internet (including all social media outlets) will be subject to these same restrictions as well as those in the various codes issued by the SFC.
Have there been any enforcement cases in Hong Kong regarding the misuse of social media in the financial sector?
Yes, in December 2011 an unlicensed individual was convicted for advising on securities through social media. Lo Kam Chung was fined and given a community service order of 80 hours for providing securities advice to subscribers to a private discussion group he had set up on Facebook between April and November 2010.
The SFC recognises that entities may use “social media – including YouTube, Twitter and Facebook – to attract investors by creating the appearance of legitimacy”. Given the growing popularity of social media strategies for financial institutions, the SFC may in the future consider issuing guidance notes and heavy penalties specifically in relation to the misuse of social media in the context of marketing financial products and / or services.