The industry reacts as the UK’s Financial Conduct Authority (FCA) today (22 October) launches an investigation into the activities of 20 social media influencers, or ‘finfluencers’, who are being interviewed under caution for potentially promoting financial products illegally.
The FCA also issued 38 alerts against social media accounts operated by finfluencers which may contain unlawful promotions.
Increasing numbers of young people are falling victim to scams, and finfluencers can often play a part. Nearly two-thirds (62%) of 18 to 29-year olds follow social media influencers, 74% of those said they trusted their advice and 9 in 10 young followers have been encouraged to change their financial behaviour.
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.”
In reaction, James Alleyne, legal director in the Financial Services Regulatory team at Kingsley Napley LLP, said: “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.”
AJ Bell director of personal finance Laura Suter said: “Too many people blindly trust anything they see on social media, but throw in a well-known celeb or a reality TV star endorsing a product and people are even more likely to trust a post. This is not a huge problem if you buy some dodgy beauty products or sign up to a duff subscription, but if you put your life savings into an investment because someone from the TV said they made impressive returns, that could be life changing.
“This is not the first time the regulator has raised concerns about so-called finfluencers pushing dubious financial products to their followers. Today (22 October) it has announced another crackdown, with 20 influencers questioned and warnings issued around others who may be unlawfully promoting financial products. The regulator is sending a clear message that finfluencers are responsible for ensuring any financial product they endorse is legitimate and that they will be held personally accountable for breaking the rules.”
Hargreaves Lansdown head of money and markets Susannah Streeter added: “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 has 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 do not fully understand, and the role of celebrities and influencers in promoting them is central to its concerns.
“Although it has 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 itis ready to take enforcement action.”
