"Although it’s clearly set out guidelines for financial promotions, it seems some finfluencers are still failing to follow them. The FCA is pulling no punches in showing its ready to take enforcement action."
- Susannah Streeter, head of money and markets at Hargreaves Lansdown
The FCA has interviewed 20 social media 'finfluencers' under caution in a crackdown on those who use their social media platforms to promote financial products.
The regulator says it is launching targeted action against finfluencers who may be touting financial services products illegally.
The FCA is currently focusing on those promoting foreign exchange and contracts for difference (CFD) trading, but has also raised concerns against other areas of financial services such as credit lending and debt solutions.
It has also issued 38 new alerts on its warnings page against social media accounts that may contain unlawful promotions.
The FCA says increasing numbers of young people are falling victim to scams, and finfluencers can often play a part. Potential penalties include fines and imprisonment of up to two years.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: “Finfluencers are trusted by the people who follow them, often young and potentially vulnerable people attracted to the lifestyle they flaunt.
“Finfluencers need to check the products they promote to ensure they are not breaking the law and putting their followers’ livelihoods and life savings at risk.”
Susannah Streeter, head of money and markets at Hargreaves Lansdown, commented: "This is the latest warning shot fired across the bows of finfluencers by the city watchdog. The FCA is very concerned about the impact of risky celebrity endorsements and the effect on vulnerable consumers. It’s repeatedly warned over the past few years that there has been a worrying trend of a growing number of consumers dabbling in high-risk products they don’t fully understand, and the role of celebrities and influencers in promoting them is central to its concerns. Although it’s clearly set out guidelines for financial promotions, it seems some finfluencers are still failing to follow them. The FCA is pulling no punches in showing its ready to take enforcement action.
"The watchdog was put on red alert after Kim Kardashian promoted Ethereum Max in 2021 without disclosing to her followers she had received money to do so. Soon after, the FCA said that it may have been the financial promotion with the single biggest audience reach in history, given the huge size of Ms Kardashian’s following, which currently stands at 364 million. She was subsequently fined $1.26 million, by the Securities and Exchange Commission. The huge and growing clout of finfluencers is also colliding with thrill-seeking tendencies which some new investors are displaying.
The findings of the 2024 HL Savings and Resilience Barometer have shown that younger people are putting high-risk investments ahead of debt repayments, leaving them in a highly precarious position. Among Millennial and Gen Z households who are in arrears, 70% of people are investing, or speculating, when they should be focusing on getting out of arrears and building up their financial resilience. Of those in arrears in the poorest slice of society, 28% of households are investing, compared to 10% in the richest portion of the population.
"The censure of finfluencers should act as another reminder to celebrities and other influencers about the risks they run if they don’t understand the rules. If they promote financial products that are subject to regulation without approval of an FCA authorised person, they may be committing a criminal offence. The Advertising Standards Authority expects influencers to label content as an ad upfront if they get any form of payment, and this must include affiliate links. For high-risk promotions, warnings need to be displayed throughout the promotion and not hidden or obscured by designs or features on a social media platform."
James Alleyne, legal director in the financial services regulatory team at Kingsley Napley LLP, added: “The FCA first warned those advertising and trading investments on social media about the risks of doing so in March 2024 and subsequently, in May, it announced that it had commenced criminal proceedings against a number of individuals for providing unauthorised advice about foreign exchange CFD schemes and issuing unauthorised financial promotions on their Instagram platforms.
"Both of these are criminal offences punishable by up to two years in prison and involve the risk of the possible confiscation of profits under the Proceeds of Crime Act 2002.
"Whilst historically the FCA may have relied upon consumer complaints to identify these accounts, its increasingly assertive and data led approach means it is now much more proactive in trawling a range of different social media to find accounts where it suspects unauthorised activity. It has the power to get accounts suspended, invite people to an interview under caution or in some cases to arrest.
"Finfluencers need to be aware that the FCA’s perimeter is broad and it is very easy to fall within its jurisdiction even without intending to do so. Similarly, financial promotions are tightly regulated. Even where individuals are acting in good faith and creating what is intended to be purely educational content, it does not take much to inadvertently cross the line into regulated business and, by doing so, become exposed to a possible criminal investigation.
"The FCA clearly sees “finfluencers”, particularly those who promote complex and high-risk products, as being a key driver of consumer harm and its focus is only likely to increase on this sector over the coming months and years.”
