The Financial Conduct Authority is taking a tough line on ‘finfluencers’ and the promotion of financial products or services online. The regulator said the clampdown is geared towards stopping consumer harm by combating “illegal and non-compliant financial promotions”. It outlined its proposals for social media guidance on 17th July.
The new guidance, which will be consulted on over the next eight weeks, will reflect the current ways social media is being used to advertise financial services and products, the FCA said. The regulator added that it has been ramping up its scrutiny of online financial promotions particularly by ‘finfluencers’ who often market illegal products to their followers. Finfluencers are usually people who have gained online fame and have large followers. They can influence the financial decision-making process of their followers and fans through promotions or recommendations on social media. The regulator said its new guidance will take into account the significant increase in notoriety of ‘finfluencers’ and the potential for consumer harm taking place online. FCA director consumer investments Lucy Castledine said: “We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm. “We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online. And for those touting products illegally, we will be taking action against you.”
Meanwhile, the FCA said it has teamed up with the Advertising Standards Authority to help educate consumers and influencers about the risks involved in promoting financial products. It also said it has helped secure changes to the advertising policies of several Big Tech companies to only allow financial promotions that have been approved by FCA-authorised firms. The regulator will be continuing this engagement to ensure more is done to protect consumers. The FCA said its consultation follows the announcement of new advertising rules for crypto firms marketing to UK consumers. From October 8, 2023, the FCA will ban incentives to invest in crypto such as ‘refer a friend’ bonuses. Firms must also introduce clear risk warnings and a 24-hour cooling period to give first-time investors the time to consider their investment decision. These measures are similar to the regime in place for other high-risk investments.