Nine ‘Finfluencers’ Charged Weeks After FCA Releases Guidance on Promoting Unregulated Financial Products on Instagram

According to the FCA, the body responsible for regulating the UK’s financial markets, defendants Emmanuel Nwanze and Holly Thompson – who are not FCA-authorised individuals – ran an Instagram account called @holly_fxtrends between May 2018 and April 2021 on which they provided advice on buying and selling contracts for difference (CFDs).

Contracts for Difference (CFDs) are a type of investment that lets investors speculate on price movements of assets like stocks, commodities, or currencies without owning them. While CFDs offer the potential for high returns, they also carry significant risks for investors, including the possibility of losing more than your initial investment. In this case, the CFDs related to foreign currencies.

The FCA introduced restrictions on how CFDs and CFD-like options were sold and marketed in the UK in 2019, including requiring firms to provide standardised risk warnings with details of the percentage of the firm’s clients that make losses on the products. According to the regulator, due to the risks associated with CFDs, 80% of customers lose money on their investments.

Alongside Mr Nwanze and Ms Thompson, the FCA has alleged that the pair paid seven other ‘finfluencers’ to promote the @holly_fxtrends account to their own Instagram followers, a combined total of 4.5 million. The other defendants are:

• Biggs Chris
• Jamie Clayton
• Lauren Goodger
• Rebecca Gormley
• Yazmin Oukhellou
• Scott Timlin
• Eva Zapico

Emmanual Nwanze faces one count of breaching the General Prohibition under Section 19 of the Financial Services and Markets Act 2000 and one count of unauthorised communications of financial promotions under Section 21 of the Financial Services and Markets Act. The further eight defendants each face one count of unauthorised communications of financial promotions under Section 21 of the Financial Services and Markets Act 2000. Each offence is punishable by either a fine or two years imprisonment.

In a plea hearing held at Westminster Crown Court on Thursday, 13th June 2024, Nwanze and Timlin (who attended in person) and Goodger and Thompson (who appeared via video) pleaded not guilty to each of their charges. The remaining five defendants did not attend or give any indication of their pleas. All nine defendants have been granted unconditional bail until a trial preparation hearing in July 2024 at Southwark Crown Court.

In March 2024, the FCA published guidance about how financial promotions should be communicated on social media, ensuring that any communications must be “fair, clear and not misleading” and must promote consumers’ understanding of the investment.

The new guidance includes clear instructions on how financial promotions should be communicated in different types of social media content:

• In stories and carousel posts on Instagram, Facebook and other picture driven social media the risk warning must be “clear and prominent, on every slide containing the financial promotion. Consumers should see the risk warning as soon as they view the financial promotion.”
• On livestreams, the risk warning should be “displayed clearly and prominently on the screen for the duration of any part of the stream involving the communication of the financial promotion.”
• On character limited media, such as X (formerly known as Twitter), the entire risk warning should be “displayed clearly within the text. Where necessary, prescribed shortened risk warnings have been used.”
• In short-form video content such as TikTok, YouTube Shorts, or Instagram Reels, the risk warning should be “clearly and prominently displayed across the screen throughout the financial promotion.”
• In long-form video content such as YouTube, the risk warning should be “clearly and prominently on the screen for the section of the video involving the communication of the financial promotion.”

The guidance also stated that an appropriate authorised person must approve any financial promotion on social media. Unauthorised individuals “such as social media influencers, who promote a regulated financial product or service without approval of an appropriate FCA-authorised person may be committing a criminal offence”. So-called ‘finfluencers’ have been told to ensure that any promotions they publish on social media are within the new regulations, and firms who choose to work with them should ensure that communications adhere to the rules.

Lucy Castledine, Director of Consumer Affairs at the FCA, told firms to seriously consider whether social media is the right channel for promoting complex financial products, commenting:

“Any marketing for financial products must be fair, clear and not misleading so consumers can invest, save or borrow with confidence. Promotions aren’t just about the likes, they’re about the law. We will take action against those touting financial products illegally. Firms need to consider whether a platform that offers limited characters or space is the right place to do so.”

Sarah Spruce, Legal Director and Head of the Investments team at TLW Solicitors commented:

“The FCA clampdown on ‘finfluencers’ and social media promotions for financial products can only be a positive step for consumers and should make regulated firms stop and think about how they are promoting their products and services.

While using influencers with vast, established social media platforms can seem like a no-brainer when wanting to raise awareness about an opportunity, the nature of the content can mean that consumers are not given sufficient information about the risks and can lose a lot of money, which comes back on the firms.

This is just the first high-profile case following the new regulations, and it will be interesting to see if there are any more similar cases in the near future.”