The financial watchdog has put social media finance influencers on notice, with the ASIC financial influencer crackdown threatening up to five years’ jail and $1 million-plus fines for ‘finfluencers’ giving out financial advice without a licence.
The relationship between social media influencers and the products and services they spruik is often murky, with a push across the board for them to declare payments and other potential conflicts of interest. Now the spotlight has turned to influencers, investment gurus and ‘wealth gurus’ who provide stock tips and other financial advice on platforms like Instagram, TikTok and YouTube – often while flaunting lavish lifestyles.
The Australian Securities and Investments Commission’s 2021 ‘Young people and money’ survey found that 33 per cent of 18 to 21-year-olds follow at least one financial influencer on social media. It also found that 64 per cent of young Australians changed at least one of their financial behaviours as a result of following a financial influencer.
“The way investors access information is changing,” says ASIC Commissioner Cathie Armour. “It is crucial that influencers who discuss financial products and services online comply with the financial services laws.”
“If they don’t, they risk substantial penalties and put investors at risk.”
Targeting unlicensed financial advice
Following on from the damning findings from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, ASIC has turned its attention to online influencers. The ASIC financial influencer crackdown extends far beyond simply targeting Ponzi schemes, pump and dump scams and other illegal practices.
ASIC is already suing one finfluencer in the federal court, accusing him of operating a financial services business without a licence.
Like other financial advisors, financial influencers require a licence if they are giving out financial advice or indicating that an investment can’t lose – even if they’re not being paid behind-the-scenes to provide that advice.
Even if they are not offering advice, Finfluencers also require a licence if they are making money through affiliate marketing links to online brokers. Simply stating “this is not financial advice” is not enough to protect them.
The crackdown is primarily targeted at stock traders, with crypto remaining a grey area. While cryptocurrencies themselves do not fit within Australia’s current legal definitions of a ‘financial product’, some crypto-assets and Initial Coin Offerings (ICOs) can be classified as financial products based on their inherent characteristics or structure.
The ASIC finfluencer crackdown follows restrictions introduced by Australia’s Therapeutic Goods Administration in January to crack down on influencers paid to promote health products online.