ASIC crackdown on influencers sharing unqualified financial advice
Brett Surman is a Financial Adviser with Gilkison Group.
Depending on where you look on social media, making money seems to be straightforward. Anyone can follow a few simple steps to buy a property with no money or learn the basics of being a day-trader in 30 minutes on YouTube, not to mention the plethora of advice on how to earn money from cryptocurrency on Instagram and the best stocks to pick on TikTok. Financial influencers or “finfluencers” with varying degrees of knowledge have blossomed on social media platforms as people seek out any advice they can on managing their money better and getting rich.
The standard of this advice varies widely from grounded, sage information on how to invest, to unregulated personalities offering shallow quick takes without fully setting out the pitfalls of what might happen to your money, or even being transparent as to if it’s their genuine opinion or a paid partnership. Part of the problem is that anyone can set themselves up as a ‘finfluencer’. In fact, it makes their life much easier if they’re unregulated – because nobody is monitoring what they say, they can say what they like, in any way they want. If you’re using social media, and you have a choice of sensible advice from a regulated firm, complete with reams of risk warnings that make everything sound terrifying, or simple 30-second tips from a finfluencer who makes it sound foolproof, the temptation is to opt for the latter.
Following these concerns, the Australian Securities & Investments Commission (ASIC) has recently put social media influencers on notice – warning they could face imprisonment and up to $1 million in fines unless they obtain a financial services licence or quit promoting stocks and investment funds online. Some finfluencers under close watch by ASIC are understood to be earning six-figure salaries from promotional deals with licensed financial firms like share market and foreign exchange brokers or investing platforms, and fees from paying subscribers and followers.
Greg Yanco, the Australian Securities and Investments Commission’s Executive Director of Market Supervision, said the regulator was closely monitoring a handful of popular personal finance influencers.
“There is a growing number of people who are effectively becoming professionals at providing information about investing on social media,” Mr Yanco told The Australian Financial Review. “Our concern is when that information turns to providing advice, and operating a business that is providing advice, without a licence. If someone is providing advice, and they don’t have a licence, we will be looking at taking enforcement action.”
Under the Corporations Act, significant penalties apply for individuals or companies that carry on a financial services business without an Australian financial services licence. It is a criminal offence to give out unlicensed advice and can lead to a maximum of five years imprisonment and/or a fine of up to $133,200 for an individual. Companies can be hit with 10 times that amount, of up to $1.33 million in fines.
Mr Yanco said for many influencers acting in good faith, as opposed to those involved in scams or promoting risky products, the regulator’s wrath could be avoided by simply becoming licensed to provide general financial advice – meaning they can freely provide information about the benefits and features of financial products, but not provide personal advice to clients.
Those providing ‘general advice’ may still need to comply with the government’s mandatory education regime for financial advisers, however, including obtaining a relevant tertiary degree and signing up to an industry code of ethics.
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