The UK’s Financial Conduct Authority has brought charges against nine individuals in relation to an unauthorised foreign exchange trading scheme promoted on social media.
Emmanuel Nwanze has been charged with running an unauthorised investment scheme and issuing unauthorised financial promotions.
The FCA alleges that, between 19 May 2018 and 13 April 2021, Nwanze and Holly Thompson used an Instagram account (@holly_fxtrends) to provide advice on buying and selling contracts for difference (CFDs) when they were not authorised to do so.
CFDs are a high-risk investment product used to bet on the price of an asset, in this case the price of foreign currencies.
The FCA also alleges that Nwanze paid Biggs Chris, Jamie Clayton, Lauren Goodger, Rebecca Gormley, Yazmin Oukhellou, Scott Timlin and Eva Zapico to promote the @holly_fxtrends Instagram account to their millions of Instagram followers.
Thompson, Chris, Clayton, Goodger, Gormley, Oukhellou, Timlin and Zapico each face one count of issuing unauthorised communications of financial promotions.
The defendants will appear before Westminster Magistrates’ Court on 13 June 2024.
In reaction to the news, Laura Suter, director of personal finance at AJ Bell, commented on the dangers of ‘finfluencers’ and why consumers should tread carefully when researching financial products and investments online.
“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 isn’t 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.
“The regulator had already fired the warning shot to so-called ‘finfluencers’, telling them that they were cracking down on misleading social media posts. While the FCA didn’t introduce any new rules or penalties for those who post misleading content, it tweaked the guidance to give more examples of when social media posts will be compliant or not. But now it’s clearly ramping up its campaign to keep finfluencers in line – this high-profile case no doubt intended to send a message to other influencers. With a maximum penalty of up to two years in prison and an unlimited fine for breaking the rules, there’s no doubt it will make people sit up and listen.
“We know that social media plays a huge part in people’s research of investment products, particularly among younger, newer investors. One in six investors used social media to either research investment, find new opportunities or get updates on existing investments – but this rose to half of all investors aged 18 to 24, according to the FCA’s Financial Lives survey.
“Research by AJ Bell’s Dodl investing app backs this up, with almost a third of novice investors saying they use social media platforms to research investment decisions, with Instagram and TikTok being the most popular. And the celebrity lure is clear, with more than two-fifths saying that a celebrity endorsement could influence them to buy a financial product and 17% already having done so.
“As with all social media, not all of the financial content on it is bad. The surge in support and information online when it comes to finances and investing can provide a real helping hand for newcomer investors. These finfluencers can help to explain tricky, technical parts of saving or investing in an engaging way that could in turn enable people to make better-informed financial decisions. But there is a darker side to many of these posts, and a significant risk of finfluencers spreading misinformation or encouraging high-risk behaviour, such as day trading in individual stocks without properly explaining the risks involved.”
