Australian Finfluencers warned of jail time for posting finance advice
The Australian Securities and Investments Commission (ASIC) warned social media influencers that they could face up to five years in jail if they continue to promote risky and sometimes fraudulent investments to often inexperienced consumers.
The corporate watchdog issued a public statement advising firms to be cautious when engaging so-called “finfluencers” and conduct serious due diligence on any prospective partners. It says those promoters must be licensed to give financial advice, or are authorised representatives of advisers. The same rules apply to influencers who earn affiliate commissions for referring their pages’ followers to online brokers, which also requires a licence to give such advice.
“Carrying on an unlicensed financial services business is an offence under the Act, unless authorised as a representative of a licensee or relying on an exemption. The Act imposes significant penalties, including up to five years’ imprisonment for an individual and financial penalties into the millions of dollars for a corporation,” a new information sheet reads.
These warnings were in response to a rise in unregulated trading offers on online forums, and a concern that retail investors are not aware of the risks associated with following such tips, ASIC said.
Influencers have significant power among younger people
A 2021 ASIC survey revealed that 33% of 18 to 21-year-olds use social media sites to get financial advice from influencers. In comparison, only three percent of people under the age of 25 have used paid financial advice to keep them in the green. Other findings also showed that two thirds of people in the same age bracket changed a financial behavior because of a celeb.
TikTok and other social media influencers, however, do not have the necessary accreditation or qualifications to offer these services, though they promise very lucrative and sometimes guaranteed returns. They also need to meet certain educational standards and manage conflicts of interest, amongst other requirements.
Tips garnered online to young investors via social media may be inaccurate, the watchdog warns, while advice from financial celebrities can come with a good deal of risk when deciding where to park their money.
ASIC Commissioner Cathie Armour said: ‘The way investors access information is changing. It is crucial that influencers who discuss financial products and services online comply with the financial services laws. If they don’t, they risk substantial penalties and put investors at risk.’
The regulator added that investment recommendations had to be produced in an objective and transparent way, so that investors could distinguish fact from opinions.