UK (Commonwealth) _ Twenty social media influencers, or “finfluencers,” are being interrogated under caution for possibly engaging in unlawful financial product promotion. The Financial Conduct Authority (FCA) has opened an investigation into their actions.
Additionally, the FCA has sent out 38 warnings on influencers’ social media pages, claiming that they may contain illegal promotions.
Nearly two-thirds (62%) of 18- to 29-year-olds like social media influencers, and nine out of ten young followers say they have been inspired to alter their financial behavior, according to the regulator. Three-quarters (74%) of those who follow them say they believe their advise.
“Promotions aren’t only about the likes, they’re about the law,” reads the caption that goes with the UK Financial Conduct Authority’s (FCA) recent decision to fine influencers for promoting an unapproved foreign currency trading scheme on social media.
The FCA’s recent guidance on financial marketing on social media was swiftly followed by this ruling, which serves as a warning to both consumers and businesses.
The regulator has been investigating influencers who promote foreign exchange and contracts for difference (CFD) trading as part of its work. Investors use investment products known as CFDs to wager on the value of assets, such as foreign exchange rates.
Concerns about the advertising of debt solutions and credit lending are also held by the FCA. It will keep running searches to find and warn about people advertising financial services or products without the necessary authorization.
“Those who follow influencers, who are frequently young and potentially vulnerable individuals drawn to the lifestyle they display, trust them,” stated Steve Smart, FCA’s joint executive director of enforcement and market monitoring.
“In order to make sure they are not violating the law and endangering the livelihoods and life savings of their followers, influencers should verify the products they endorse.”
“Social media influencers can develop a massive fan base of millions of people who consider their statements and advice and may choose to act on them,” said Rocio Concha, director of policy and advocacy at Which? “This could prove extremely costly if people are encouraged to make unnecessary risky decisions.”
The FCA has been urged to remind influencers of their legal obligations. In order to send a clear message that social media influencers will be held accountable for their posts even though they may be able to make significant money, the regulator should move swiftly to punish anyone discovered to be infringing the law.
Before deciding how to invest their money, the regulator advised consumers to review the FCA’s warning list. Information to assist those considering investment options is also available on its InvestSmart page.
Influencers who promoted financial items on social media could face prosecution or fines of millions of euros, according to previous warnings from EU finance watchdogs. Investment advice must include cautions and caveats in accordance with EU regulations against financial market exploitation, but lawmakers are finding it difficult to adapt these regulations for the digital era.
The European Securities and Markets Authority released a statement that stated, “You need to be aware of the rules if you are a finance influencer, a technical expert, or someone with just interest in financial investments.”
According to the statement, financial influencers, sometimes referred to as finfluencers, must distinguish between fact and opinion and declare any personal stake in the product they are promoting, even if the advice is indirect or non-technical.
According to ESMA, noncompliance or trading based on insider knowledge can result in fines of up to €5 million or criminal penalties. The purpose of EU market abuse regulations is to shield investors from frauds like pump-and-dump schemes, in which a security is advertised in order to raise its price before the organizers sell.
However, social media-driven trading has often taken financial markets by surprise. For example, in the 2021 “meme stock” incident, conversations on the Reddit platform significantly increased the price of companies like GameStop.
France passed a new rule last year that restricts the advertising of dangerous goods like tobacco, cosmetic surgery, and cryptocurrencies. The law targets online influencers who have millions of followers on platforms like Instagram and X.
Last year, the Financial Conduct Authority, the UK’s market watchdog, said that it had partnered with Big Tech companies to stop thousands of unauthorized financial advertisements.
