The Financial Conduct Authority has delivered a warning to ‘finfluencers’ (financial influencers) over promoting financial products and services on social media without proper authorisation.
YouTube, TikTok and Instagram are awash with unqualified finfluencers who often jump on financial trends to gain an algorithmic advantage.
But Lucy Castledine, the FCA’s director of consumer investments, warned that “promotions aren’t just about the likes, they’re about the law. We will take action against those touting financial products illegally”.
“Firms need to consider whether a platform that offers limited characters or space is the right place to do so,” Castledine said. “Scrutiny of financial promotions has been ramped up and last year we removed over 10,000 misleading adverts, up from around 8,500 in 2022.”
Guidance clarified
Her comments come as the FCA publishes its finalised guidance on financial promotions on social media.
The nearly 50-page document outlines companies’ and financial influencers’ obligations under the Consumer Duty, clarifying the regulator’s expectations.
“Under the Consumer Duty, financial promotions must support retail customer understanding and communicate information to retail customers in a way that equips them to make effective decisions,” said the FCA.
“We want firms to consider this guidance alongside their obligations under the Duty to deliver good outcomes for retail customers.”
The guidance warned that unauthorised individuals promoting financial products may be committing a criminal offence, even if they do not have a commercial relationship with the firm they’re promoting.
Cryptocurrency became a breeding ground for finfluencers during the 2021 bull run.
In the US, this led to numerous charges of high-profile individuals.
Kim Kardashian was sued by the US Securities and Exchange Commission for touting a cryptocurrency offered and sold by EthereumMax without disclosing the payment she received for the promotion.
She agreed to pay $1.26 million in penalties.
“Ms. Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities," SEC chair Gary Gensler said at the time.