Finfluencers have been warned
ASIC has recently released an information sheet for social media influencers who discuss financial products and services online (finfluencers) and Australian Financial Services licensees who use influencers, to clarify the regulator’s stance on the delivery of unlicensed financial advice by finfluencers. This comes after a 2021 ASIC survey which found that over a quarter of 18-21 year olds follow at least one finfluencer and 64% of these individuals change at least one of their financial behaviours as a result of this.
Businesses who recommend, quote, claim or arrange the transfer of financial services generally require an AFS license to legally operate. Thus, if a finfluencer carries out the role of financial service provider without a license or misleads consumers, there is a risk that they will break the law.
See examples below of comments which can be made which are likely illegal without a AFS License:
Recommendations about investing or not investing in products or classes of products could breach the law by giving unlicensed financial product advice. This includes statements such as:
- You should invest in X, Y and Z for a positive return
If you are actively arranging or are involved with a person buying or selling a financial product through, for example, having an affiliate link to a AFS licensee’s trading platform. Again, there is a risk these actions could be flagged by ASIC as dealing by arranging.
Also, any statements which are untrue, inaccurate, and unable to be substantiated despite any intention could result in misleading followers which is illegal. This can include statements such as:
- Trading in stocks X and Y are risk free and absolutely safe, I made a ton of money off them!
So what can finfluencers talk about?
Factual information about features of a financial product or terms and conditions of financial products. Thus, finfluencers are able to educate the public, and their followers more specifically, about finances, the financial market and how it works rather than recommending or guiding them to how to grow their finances.
What can happen if finfluencers don’t follow the ASIC’s advice?
ASIC have been strong in their position and are ready to take action against those who do not comply with the law with penalties including five years imprisonment or large fines estimated to be up to $1,000,000. ASIC also demonstrated their willingness to remove and ban finfluencers from posting non-complaint content as seen in the case of Tyson Scholz, an Instagram and Twitter influencer mogul who, without an ASF License, created training course with a membership fee to offer tips and advice to paying customers in early 2021. The case was taken to the Federal Court which saw Scholz unable to promote, receive, solicit, transfer or dispose of customer funds in connection to his business and directly or indirectly promote financial services businesses in Australia.
von Muenster Legal’s Key Takeaways:
- Prior to posting financial content ensure that you aren’t advising your followers but are informing them of the world of finance in general
- Make sure you double check the information you provide to ensure it is not misleading or deceptive in any way
- If you do want to use your platform to provide financial advice, apply for an AFS License prior to posting this information (this can be a lengthy and expensive process)
If you ever have any questions about whether the content you are producing is complaint with ASIC’s guidelines, feel free to contact us at info@vonmlegal.com
To see ASIC’s full guide sheet follow this link: https://bit.ly/3L9xLJY