This article originally appeared in financemagnates.
Affiliate Marketing - Now the New Trading Platforms Battleground
How do market-leading companies make it a compliance success?
Affiliate marketing is a well-known key component of any marketing strategy and customer acquisition activities. Trading platforms, in particular, have been increasingly using this method to expand their customers’ base. In addition, a new community of "financial influencers" has emerged, driving promotion in this compliance-sensitive landscape where guidelines and standards are too strict to ignore.
This has clearly increased any concerns among financial regulators who have now shifted their attention to these third-party ‘influencers’ and some of their acquisition practices that could harm retail investors.
Who is responsible?
To tackle this new compliance front, France and Australia, for example, introduced new regulations that influencers must adhere to. However, the primary responsibility for ensuring ethical and fair marketing practices when practicing affiliate marketing still remains with the brokerages.
Trading industry marketing campaigns – regulatory stringency enhanced
While this responsibility isn’t new for trading platforms, there is a global shift of regulatory authorities becoming stricter. Trading companies’ responsibility to provide accurate, complete, and non-misleading information to investors is taking center stage for the foreseeable future.
As a result of this growing crackdown, brands are now increasingly exposed to an emerging risk frontier: their marketing campaigns, and more specifically, their affiliate marketing campaigns.
In a recent interview with Finance Magnate Dr. George Theocharides, Chairman of CySEC, he said: “We have no tolerance for aggressive marketing. We take action where there's any misinformation or misguidance.” This year, CySEC issued a €1M fine to a trading company for marketing non-compliance, among other violations.
This regulatory stringency follows measures like ESMA's Product Intervention Measures, which imposed strict limitations on marketing complex financial products like binary options and CFDs to retail investors. National authorities have been actively enforcing these rules and have issued fines to brokerages, ranging from a few hundred euros to well above one million.
Similar scrutiny is extending to those ‘finfluencers’ who continuously provide financial guidance, investment tips, and insights using popular online platforms. Without proper monitoring, ‘finfluencers’ may unintentionally or intentionally spread misinformation, endorse risky investment strategies, or have conflicts of interest, posing possible risks to their followers and the companies they partner with or represent.
For example, the FCA has been tightly overseeing affiliates since 2022. Case in point: Sarah Pritchard, the FCA’s executive director of markets, recently said, “By drawing on better technology, we’re finding poor quality or misleading ads quicker. And where we find them, we’re stepping in to make firms improve them or remove them entirely.”
These words have translated into increased demand for automated platforms to not only identify possible risks but to quickly mitigate them.
Following these latest developments, it’s been made clear that trading platforms intending to grow their business and customer base must establish robust compliance controls to ensure that the following significant needs are met:
- Their marketing and affiliates’ teams adhere to the highest ethical, legal, and compliant marketing practices.
- They can easily expand their affiliate marketing activities, attract more customers, and with that, expand their market reach.
By doing so, leading companies will not only advance their business but avoid unnecessary fines and possible scrutiny as well as obviously protect their brand and market reputation.
Leveraging AI to find the needle(s) in the compliance haystack
Even well-intentioned compliance teams often struggle to keep up with the rapid pace of their multi-channel marketing campaigns. The task of accurately monitoring numerous affiliates in different countries and their various channels can be nearly impossible. Fortunately, today, AI can play a significant role in real-time screening and identifying compliance risks in both owned and affiliate marketing campaigns.
Here are four key areas where AI-based monitoring significantly helps compliance teams ensure marketing compliance:
1. Omni-channel monitoring – all inclusive
Trading companies trying to reach potential investors on social media or through email campaigns and traditional advertising channels can translate into compliance leaders that have the almost impossible job of oversight. Manual checks can no longer address the complexity of fast-moving, versatile, and geo/language-sensitive advertising content that is generated and distributed.
AI-based compliance platforms offer automated solutions that rapidly screen, detect, and flag any non-compliant mentions from various geographic sources (and languages). This includes social media, news websites, forums, blogs, video platforms, and ad networks. Regardless of the marketing channel, next-gen compliance management platforms will precisely detect it.
2. Multi-jurisdiction & language monitoring
While partnering with local affiliates can do wonders for a brand’s geographical reach, it creates one of the toughest challenges: monitoring in various languages and making sure it complies with the local regulation. Utilizing solutions based on LLM’s (Large Language Models)Generative AI adds a multi-jurisdiction compliance “officer” that identifies in real-time risks in any language according to the local regulatory policy.
3. Mitigation management on autopilot
Compliance teams understand that it's not sufficient to only identify compliance risks; managing the mitigation process is equally important. Today all businesses must take swift action to reduce the exposure of problematic brand-damaging marketing content as soon as it's identified and flagged. No brand can afford not to.
A smart marketing compliance platform addresses it all: It streamlines this process by automatically generating mitigation tasks, assigning them to team members, and, most importantly, promptly and real-time flagging the most significant risks, allowing immediate mitigation.
4. Growing your affiliate (& customer) base safely
Affiliates can attract more customers, often many more customers. Growing businesses’ affiliate base efficiently without exposing them to risk means constant communication and real-time collaboration as well as real-time monitoring. Being able to prevent violations from even happening is the real industry-focused game changer.
No two affiliates are alike. In a perfect world, brands would be able to train each affiliate according to their method of bringing clients. Utilizing a compliance platform will allow any business to automatically identify where a compliance violation occurred, notify the affiliates, and quickly train them with personalized dos and don’ts.
By doing so, leading compliance teams can now demonstrate to regulators the dedicated efforts and resources aimed at quickly mitigating violations at any scale.
Next-gen compliance management, now at your service
Sedric's "Compliance as a Service" platform offers this exactly: Holistic AI-powered compliance management that provides trading platforms the superpower to automatically and rapidly oversee communication and marketing activities across multiple channels. Starting with calls, emails, chats, websites, as well as every social media channel, no matter the language, location, or market – a compliance platform that has got any business covered.
To discover possible gaps in your ‘brand health’ and receive a real-time report, book a brief meeting here.
To learn more about how Sedric can help you ensure marketing compliance, request a demo.
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Consumer Financial Services Regulatory & Compliance Group
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As Gen Z enters the workforce, you’ll have up to four generations in your agency. Everyone learns differently. Young people learn from TikTok videos, and there is a professional term for this: micro-learning. Such short videos are especially efficient when sent out close to the time when the violation occurred.
Barron & Newburger
The most efficient training systems I’ve seen are those which build surgical, data-driven compliance content and provide agents the exact training they need when they most need it. This approach avoids wasting time and money on training which does not address the need. Continuous, role-based training programs that focus on the needs of each individual agent are some of the most efficient and effective I’ve seen.
Bedard Law Group
“Training is only going to be effective if it's done at or near the time the violation occurred. As agents handle hundreds of calls a week they will not have the capacity to remember particular moments of each consumer interaction. Therefore, effective monitoring will be critical to address the deficiency when it happens, in order to remediate quickly so that it does not become a systemic problem going forward.”
Consumer Financial Services Regulatory & Compliance Group
Clark Hill
