Careful consideration required before engaging celebrity endorsements or "finfluencers"
Updated: Jul 30, 2021
The past decade has seen the rise of the “influencer” but recently these social media stars - who amass huge numbers of followers and promote paid content - have been branching out into promoting products which fall into the financial space and potentially providing financial advice.
Of course, only those who operate under a financial services licence are authorised to provide financial advice in Australia. But the content of social media "finfluencers" is now higher on ASIC's radar. This is unsurprising given:
ASIC's consumer protection focus
the amount of time we all spend online consuming content
the extent of free content available on social media and;
the large reach and influence of influencers.
When asked about concerns that ASIC has in relation to social media influencers and financial advice in the Joint Committee on Corporations and Financial Services, ASIC Commissioner, Danielle Press stated:
It really comes down a question of whether or not it is financial advice. If it is, it's probably unlicensed. That is illegal activity, and we would be very interested in that illegal activity. We are looking at unlicensed advice as one of the topics that we think very closely about and are considering. What we would suggest is that, if there is evidence of unlicensed advice being given, we would very much appreciate it being referred to us so that we can look at it appropriately, because it is illegal activity.
This question was posed in response to comments made by Senator Jane Hume to attendees of a conference of the Stockbrokers and Financial Advisers Association in May (which we briefly wrote about here) in which she focused on positives of social media financial influencers, stating it is "mostly a good thing".
At the conference, Senator Hume said:
Some of the information and opinions that consumers receive from online forums will be bad but some of it will be good, and a lot of it will better engage younger generations in investment and financial markets.
We have to back Australians to be sensible enough to judge for themselves whether to put their hard earned money into higher-risk assets.
ASIC's focus on unlicensed advice is not only relevant to traditional financial services businesses, but it is also relevant to digital currency businesses.
If a crypto-asset or your platform itself has the characteristics of a financial product, an influencer engaged to promote it is likely to be providing a financial service. If that "finfluencer" is not operating under a financial services licence and provides a financial service, they may be committing an offence which carries a penalty of five years imprisonment and/or a fine of up to $126,000 for an individual or $1.26 million for a corporation.