ASIC has issued warning notices to 18 social media 'finfluencers' suspected of unlawfully promoting high-risk financial products and providing unlicensed financial advice to Australians as part of a Global Week of Action Against Unlawful Finfluencers by nine international market regulators.
Last week, ASIC and regulators from the United Kingdom, United Arab Emirates, Italy, Hong Kong and Canada took coordinated actions to crack down on unauthorised finfluencers.
Together, the nine regulators used a combination of regulatory and enforcement powers including arrests, warning notices, website takedowns, educational schemes with authorised finfluencers and consumer awareness programs to put unauthorised finfluencers on notice and warn consumers of the risks of unauthorised and misleading finfluencer content.
ASIC Commissioner Alan Kirkland said, 'Regulators across the world have joined forces to disrupt unlawful finfluencer activity.'
'It's important that consumers separate fun from fact when it comes to finfluencer content. Popularity doesn't equal credibility. Check their credentials and whether they're licensed or authorised, before checking your money out.'
Following the issuance of INFO Sheet 269 Discussing financial products and services online (INFO 269) in 2022, ASIC has observed a noticeable drop in social media posts spruiking financial products and services by unauthorised finfluencers.
'In Australia, after ASIC issued INFO 269, we saw that many finfluencers changed what they were saying or became licensed or authorised representatives to comply with the law,' Mr Kirkland added.
'Australian Financial Services licensees who engage influencers also improved their due diligence and monitoring of finfluencers to ensure they don't provide unlicensed financial services and that consumers are not misled.'
ASIC's current concerns lie with finfluencers positioning themselves as so-called trading experts, who are providing unauthorised financial product advice and promoting high-risk, complex investment products that can cause real consumer harm, such as contracts for difference (CFDs) and over the counter (OTC) derivative products.
Their social media content is often accompanied by misleading or deceptive representations about the prospects of success from the products or trading strategies they promote, sharing images of lavish lifestyles, sportscars and other luxury goods.
'We are seeing a pattern where these unlicensed finfluencers invite consumers to join their closed communities or forums to learn their secrets to success or copy their trades,' Mr Kirkland said.
If a finfluencer is not licensed, an authorised representative or exempt, they're legally not permitted to carry on a business of providing investment advice in Australia.
Investors and consumers can check the credentials of finfluencers out by using ASIC's professional registers search tool.
Recent Moneysmart research found that 41% of young Australians seek financial information or advice from online sources such as social media, including finfluencers.
'Australia's financial services laws protect investors and promote market integrity. They set minimum requirements and provide important protections for investors if something goes wrong.
'If you spruik or discuss financial products and services online, you need to carefully consider how the law applies to you and seek legal advice if you are unsure,' Mr Kirkland said.
ASIC conducts targeted monitoring of financial discussion by finfluencers that feature or promote financial products. Where we see harm occurring, we will take action to enforce the law.
Unlicensed activity can be reported to ASIC on our How to report misconduct webpage or by calling 1300 300 630 so that we can consider appropriate regulatory action.
Background
In addition to ASIC, the nine regulators involved in the Global Week of Action Against Unlawful Finfluencers included:
- Canada, Alberta Securities Commission
- Canada, Autorité des marchés financiers, Quebec,
- Canada, British Columbia Securities Commission
- Canada, Ontario Securities Commission
- Hong Kong, Securities and Futures Commission
- Italy, Commissione Nazionale per le Società e la Borsa
- United Arab Emirates, Securities and Commodities Authority
- United Kingdom, Financial Conduct Authority
ASIC issued INFO 269 in March 2022 for social media influencers who discuss financial products and services online.
The licensing provisions under the Corporations Act 2001 (the Act) apply to persons who carry on a financial services business in Australia. This includes persons who provide financial product advice or arrange for a person to deal in a financial product. Carrying on an unlicensed financial services business in Australia is an offence under the Act, unless authorised as a representative of a licensee or relying on an exemption.
The Act imposes significant penalties, including up to five years' imprisonment for an individual and financial penalties into the millions of dollars for a corporation.
The law also prohibits conduct that is misleading or deceptive, or is likely to mislead or deceive, in relation to financial products or services. A finfluencer does not need to be licensed to breach the misleading or deceptive prohibitions.
In December 2022, the Federal Court found social media finfluencer Tyson Robert Scholz contravened s911A of the Corporations Act by carrying on a financial service business (between March 2020 and November 2021) without an Australian financial services licence (22-371MR).
ASIC is Australia's corporate, markets and financial services regulator.
