FCA cracks down on Freetrade’s influencer posts on social media

abdelaziz Fathi

The Financial Conduct Authority has sounded the alarm to the UK FinTech FreeTrade over what it sees as misleading advertising to attract unprofessional investors.

The UK financial regulator ordered the investment platform to remove all paid-for social media influencer posts, citing concerns it could lure in-debt consumers hoping to cash in on the low-cost investing boom. The City watchdog said FreeTrade should remove all social media campaigns to stop young people being tempted into risky investments.

The order applies to all adverts appearing on social media platforms, including without limitation, Facebook, YouTube, Instagram, LinkedIn and Twitter. The supervisory notice also mentions the video sharing app TikTok, which is one of the social media channels most used by influencers promoting high-risk trading.

The stock broking upstart, which was valued at £650 million in the latest crowdfunding raise, says it has 1 million customers trading on its platform. Rather than partnering with an established broker, Freetrade holds a ‘full scope firm’ license from the FCA.

In its notice, the FCA said: “The authority considers that the promotions provide consumers with the impression that they could reduce debt by following the steps taken by the social media influencer and use the dirm as a mechanism to make money. However, the authority considers this to be misleading as there are no guarantees that any investment will result in positive gains in the short or long term. Consumers already in debt are likely to be particularly vulnerable to this.”

FCA has been sharpening its focus on retail investment

The FCA has already funded a series of warning advertisements that pop up whenever internet users in the UK search keywords like “high return investments” or “best stocks to trade” into Google. The UK’s top financial watchdog also bans incentives to invest such as refer-a-friend bonuses or new joiner giveaways.

The FCA has been sharpening its focus on retail investment and trading brokers as financial scams are becoming more sophisticated in hiding their true corporate details and contacts. The regulator appears determined to protect consumers not only from fraud but also from losing small fortunes to regulated firms that may offer “products causing similar harms.”

Recently, the watchdog also highlighted its concerns over financial promotions that falsely implied that all of a firm’s activities were regulated by the FCA or other regulators, when in fact they were not.

Retail FX/CFDs brokers have also come under the spotlight with the closure of two regulated brokers in a single month. SVS Securities Plc (SVS), which was set-up in 2002, acted as a regulated financial services broker, holding significant amounts of client money and assets. The second case involved AFX Markets Ltd (AFX), which was set up in 2011 and FCA-authorized since May 2012.

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