Illegal Advertising Leads to FCA Interviewing
20 Finfluencers ‘Under Caution’

Brands know that celebrity endorsement can be powerful, adding a layer of trust and credibility, and the use of influencers in the financial industry is no different. Often referred to as ‘finfluencers’, people with a large social media following can reach out to their ready-made audience, promoting investments in a novel way. What many people do not realise, however, is that these celebrities might not know much about the products they are endorsing or the need to abide by strict regulations regarding online financial promotions.

Earlier in the year, the spotlight turned to reality stars from TV’s Geordie Shore and The Only Way is Essex after being charged with pushing risky, unregulated investments on Instagram.

The Financial Conduct Authority (FCA) is the UK’s financial services watchdog. It has enforcement powers and can conduct criminal investigations, much like the police do, concerning financial crime. The FCA can interview anyone suspected of a crime under caution to answer questions and provide further documentation about the matter being investigated.

In a recent update from the FCA, 20 influencers have been interviewed as a result of a ‘targeted action’, and 38 alerts were issued against social media accounts that may contain unlawful promotions.

The FCA has been clamping down on finfluencer activity, as it sees a real risk to younger people, who are financially naïve and tend to be less experienced with savings and investments. FCA data has highlighted that 62% of 18-29-year-olds follow social media influencers and 74% of those said they trusted their advice.

A spokesperson for the FCA said:

“Finfluencers are trusted by the people who follow them, often young and potentially vulnerable people attracted to the lifestyle they flaunt. [They] need to check the products they promote to ensure they are not breaking the law and putting their followers’ livelihoods and life savings at risk.”

Finfluencers do not need financial qualifications and are often paid just to push a particular product. They may not understand the product or realise the financial risks, including of scams, to their audience. It is clear that there is a need for FCA regulation, and any online financial promotion should “provide a balanced view of the benefits and risks” to allow customers to make well-informed decisions.

Sarah Spruce, Legal Director at TLW Solicitors, says:

“Some celebrities, like Martin Lewis, are well-known for saying they never endorse financial products, but he is the exception, rather than the rule, and it still doesn’t stop scammers using his name, photo – and even deep-faked video – to promote dodgy investments. It’s easy to see how people are taken in by someone they feel they know and can trust. The FCA is clearly and rightfully starting to recognise this and is taking action to ensure that, even those acting in good faith, creating purely educational content, are aware of their responsibilities and follow the rules.”

1. Know the rules

Not all finfluencers are breaking the rules, and a great deal of helpful and compliant financial information is available online through social media and websites. However, some celebrities are promoting scams or high-risk investments.

To guard against the risk of falling under the spell of these promotions, it is useful to understand the rules around financial promotions, including:

• A financial promotion is one that “includes an invitation or inducement to engage in investment activity”.
• Influencers must label their content as an advertisement upfront.
• Financial promotions should carry risk warnings, displayed prominently.
• Only an ‘authorised person’ or their approved influencer can promote financial products on social media.
• Communications that originate outside the UK are regulated if they are “capable of having an effect in the UK”.
• Certain high-risk investments are banned from being mass-marketed to retail investors (everyday people), including mini-bonds.
• Other high-risk investments, such as cryptoassets and crowdfunding, can be marketed but are subject to specific restrictions.

2. Do your research

Familiarise yourself with common scam types and tactics. So-called ‘get rich quick’ schemes could be fake, designed simply to harvest names and email addresses, or they may be sophisticated scams that use social engineering techniques to persuade you to transfer money – the latter is known as Authorised Push Payment (APP) Fraud, lots of examples of which can be found here.

Remember that if an investment seems too good to be true, it probably is!

3. Get independent financial advice

The FCA maintains a list of authorised firms and individuals who can provide trusted, regulated advice. Websites like Unbiased and VouchedFor can also help you find an adviser in your local area.