Warning for social media influencers – comply with financial services laws or risk substantial penalties
More and more young people are turning to influencers on social media platforms (such as Instagram, TikTok, Twitter and YouTube) for financial and investment advice.
According to ASIC’s ‘Young People and Money – Survey Snapshot’ published in December 2021, 28% of young people surveyed indicated that they follow at least one financial influencer (otherwise known as a ‘finfluencer’) on social media. Of those, almost two thirds (64%) reported that they have changed at least one of their financial behaviours as a result of following a financial influencer.
As a result, in March 2022, ASIC released Info Sheet 269 to warn social media influencers that they must operate within the financial services laws when discussing financial products or services online, or risk facing significant penalties.
- Social media influencers can contravene financial services laws in various ways including by:
providing unauthorised financial product advice. Financial product advice might include making a recommendation in relation to a ‘financial product’ (which includes a wide range of financial instruments and products such as shares, insurance policies, superannuation funds, crypto assets, derivatives, school and even funeral funding arrangements); - arranging for a person to acquire or dispose of a financial product without the proper authorisations; or
- engaging in misleading or deceptive conduct.
If you carry on a business of providing financial services, you must hold an Australian Financial Services Licence (AFSL) (unless you are exempt or are authorised to provide those services as a representative of an AFSL holder).
The information sheet cautions that significant penalties exist under the Corporations Act 2001 for those who contravene the financial services laws, including up to five years’ imprisonment for an individual, and financial penalties into the millions of dollars for a corporation.
There is nothing new about ASIC’s warnings, except that ASIC recognises the increasing potential for a breach of the financial services laws to occur online by social media influencers. While ASIC recognises that this area of the law is complex and it is not always easy to identify what is permissible and what is prohibited, ASIC cautions that it is the responsibility of the influencer and the AFSL holders who use influencers to ensure that any content posted complies with the law.
Influencers who discuss financial products and services online should seek legal advice if they are unsure of their obligations.
A complete copy of ASIC Info Sheet 269 can be accessed here: https://asic.gov.au/regulatory-resources/financial-services/giving-financial-product-advice/discussing-financial-products-and-services-online/.
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Disclaimer
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.