The Financial Conduct Authority (FCA) has launched new rules for firms and financial influencers ('finfluencers') to follow in its battle to stop misleading social media adverts.
The watchdog warned that any unauthorised influencers who promote financial products or services subject to regulation, without necessary approval, could be committing a criminal offence.
From now on, firms will need to include appropriate risk warnings with all their promotions on social media ads, memes and reels posted on platforms like Facebook and Instagram.
Firms must ensure their adverts clearly communicate information to help customers make “effective and well-informed decisions”. This is particularly aimed at celebrity-endorsed, high-risk investment adverts that pop up on followers’ mobile phones and devices.
The FCA’s publication also said businesses should concentrate on providing information about what their target audience needs to know and clear up any potential confusion that may arise among viewers.
As well as the warnings’ inclusion, finfluencers were also asked to consider whether they are indeed suitable to promote financial products while ensuring they comply with the Advertising Standards Authority’s (ASA’s) expectation of labelling the content as an advert when doing so.
Finfluencers’ posts ‘aren’t just about the likes’
Lucy Castledine, director of consumer investments at the FCA, said that “any marketing for financial products must be fair, clear and not misleading.” This is so customers and viewers of the ads can “invest, save or borrow with confidence.”
Castledine added: “Promotions aren’t just about the likes, they’re about the law. We will take action against those touting financial products illegally.”
The updated guidance follows consultations by the FCA in July 2023 with 100 relevant parties, including a mix of trade bodies, individuals and financial firms. Despite the regulator saying the fresh rules were “generally welcomed” by those consulted, 11 respondents felt the risk warning expectancy “goes too far”.
Those critics believed customers would be put off by large, prominent displays on their content.
‘Regulators clearly horrified’ by ‘Wild West’ financial social media
Susannah Streeter, head of money and markets at Hargreaves Lansdown – which won Best Lifetime Investment ISA at the YourMoney.com Awards 2024 – said: “Regulators are clearly horrified at the damage superstar celebrities can do to the bank balances of vulnerable consumers, who are influenced by almost every move they make.
“The delusions of quick riches can spread far too rapidly on social media, with speculation amplified by reposts by millions of followers. The watchdog has been on high alert ever since Kim Kardashian promoted Ethereum Max in 2021 without disclosing to her followers she had received money to do so.”
Kim Kardashian was fined over a million dollars for promoting a cryptocurrency company that has since “plummeted like a stone”, according to Streeter.
Laura Suter, director of personal finance at AJ Bell, said: “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 those risks.
“There’s a real danger that financial social media becomes a Wild West, rather than a space to get accurate, clear information on financial planning.”
