ASIC warns companies using social media ‘finfluencers’

ASIC warns companies using social media ‘finfluencers’

November 17, 2021

The Australian Securities and Investments Commission (ASIC) is warning companies they should check whether social media “finfluencers” that promote their financial products or securities are licensed to give financial advice, or are authorised representatives of advisers.

ASIC commissioner Cathie Armour says firms that hire unlicensed finfluencers could leave themselves open to being in breach of the Corporations Act 2001. They should also be aware that finfluencers “may be generating income from content clicks or views, which may give rise to a conflict of interest or result in advice that is not in consumers’ best interests”, she says.

ASIC commissioner Cathie Armour has warned companies they can be in breach of the law if they engage social media influencers who are deemed to be giving financial advice without a licenceCredit:James Alcock

The number of social media finfluencers is growing and policing those who are deemed to be giving financial advice without a licence is difficult for ASIC to police.

Licence holders and their representatives must meet certain educational standards, manage conflicts of interest and provide financial services “efficiently, honestly and fairly”. Most finfluencers are not licensed.

While many do no more than discuss personal finance in a general way and are usually not required to be licensed, there are those who are endorsing particular investments, where they are paid for the promotion.

ASIC is undertaking a review of finfluencers to understand their business models and how financial services law applies to their activities.

The regulator is also engaging with social media platforms about their responsibilities and the limits of acceptable promotion, and is stepping up surveillance of online forums that promote shares of listed Australian companies.

Armour says companies may see collaborations with finfluencers as a “fast and effective way” to promote their securities, particularly to younger retail investors.

“However, companies should be cautious when engaging finfluencers – as part of their promotional initiatives… If you’re approached by a finfluencer seeking to collaborate, or you’re considering reaching out to one, make sure you do your due diligence as they may contributing to regulatory risks,” Armour writes in an article published by the Australian Institute of Company Directors.

The regulator’s warning is taken to apply to all financial services businesses it regulates, not just Australian listed financial services businesses.

Angel Zhong, senior lecturer in finance at RMIT University, who has conducted extensive research into investor behaviour, welcomes the regulator’s approach.

She says ASIC recognises the growing popularity of finfluencers, the detrimental effect they can have on investors’ financial well-being and the turbulence they can cause in financial markets.

Dr Zhong says it is difficult to police finfluencers, given the wide range of social media, differing platform guidelines and the grey area about whether finfluencers are giving financial advice.

“The regulator is reminding companies that by engaging finfluencers they may be entering dangerous territory,” Dr Zhong says.

ASIC’s Moneysmart website maintains a Financial Advisers Register, which lists all those licensed to provide financial advice to retail clients.

Most Viewed in Money

From our partners

Source: Read Full Article