Are you under the ‘finfluence’? ASIC publishes information for social media financial influencers addressing when influence is actually advice

ASIC has recently published information for social media influencers who discuss financial products and services online. We take a quick look at who ‘finfluencers’ are and why ASIC is concerned about what they are posting, or ‘advising’, on social media.

The rise of the financial influencer

The financial influencer, or ‘finfluencer’, has taken the financial world by storm as young people reach out to social media for guidance on investments. These finfluencers have taken to social media platforms such as TikTok, YouTube and Twitter to share their insights on shares, EFTs¹ and even NFTs² and provide affiliated links.

The increased popularity unsurprisingly peaked ASIC’s interest with the regulator publishing information (INFO 269 Discussing financial products and services online) on 21 March 2022 regarding how the law applies to finfluencers.

The next generation of investors

The ASX Australian Investor Study 2020 showed an influx in the next generation of investors, revealing that of those investing under the age of 25, 18% received information through social media and 41% stated they preferred to receive investor education through YouTube.³ ASIC’s Young People and Money Survey reported in 2021 that 28% of young people follow at least one finfluencer, whilst 64% of those people indicated they changed one of their financial behaviours as a result.⁴

Is it financial advice?

The information finfluencers publish walks a fine line when it comes to financial advice. ASIC recognises this risk in INFO 269 when covering obligations surrounding AFS licensing.⁵ ASIC Commissioner Cathie Armour stated, “It is crucial that influencers who discuss financial products and services online comply with the financial services laws. If they don’t, they risk substantial penalties and put investors at risk.”⁶ Ms Armour commented that “ASIC monitors select online financial discussion by influencers who feature or promote financial products for misleading or deceptive representations or unlicensed advice or dealing“.⁷

Finfluencers need to carefully consider whether their content requires them to hold an AFS licence, or be an authorised representative of an AFS license holder under the Corporations Act 2001 (Cth).⁸ ASIC says that commonly used tactics such as affiliate links, are likely to be considered dealing by arranging, whilst using terms like ‘risk-free’ or ‘substantial returns’ are likely to be misleading. However, often finfluencers are unaware of their legal obligations and disclosure requirements under consumer protection and financial services laws, such as the design and distribution obligations in Part 7.8A of the Corporations Act.⁹

AFS licensees beware

An AFS licensee who chooses to engage with finfluencers, should be mindful of the risk that they may be held liable for misconduct. An influencer acting on their behalf is a representative under the Corporations Act, and triggers numerous compliance and monitoring obligations.¹⁰ This requires due diligence, ongoing compliance management resourcing and risk management systems to be in place and considered prior to engaging an influencer.

Penalties apply

This provides a timely reminder that penalties under the Corporations Act impose substantial fines and imprisonment for up to 5 years for an individual, and fines into the millions for corporations engaging in this behaviour. An influencer does not need to be licensed to breach the misleading or deceptive provisions.

ASIC is watching…

In an interview following the release of INFO 269, ASIC executive director Greg Yanco warned finfluencers that ASIC was closely monitoring popular personal financial influencers. It’s lucrative for the finfluencer, and ASIC is watching when it turns into a business providing advice without a licence and enforcement action will be looked at.

It is clear that finfluencers are the product of the power of social media as platforms for conducting business. However, in the world of financial products and services, unlike other products and services generally associated with influencers, posting financial content on social media may risk liability by way of regulatory fines or third party litigation brought by those influenced by it.

This article was written by Jason Symons, Partner, and Brooke Volbrecht, Solicitor.

¹An ‘EFT’ or ‘exchange-traded fund’ is a basket of securities that investors can trade through a brokerage firm which are designed to track a particular index (e.g. S&P 500, NASDAQ), industry or commodity.
^​2An ‘NFT’ is a cryptographic tool that acts as a certificate of authenticity for ‘scarce’ goods and stands for ‘non-fungible token’. For more guidance on NFTs, consider Luke Dale and Daniel Kiley’s (HWL Ebsworth), What the NFT? (9 February 2022).
³ASX, Australian Investor Study (August 2020) 15, 26.
⁴ASIC, MoneySmart Network and Australian Government, Young People and Money Survey – Snapshot (December 2021) 9.
⁵ASIC, INFO 269 Discussing financial products and services online (March 2022).
⁶ASIC, 22-054MR ASIC issues information for social media influencers and licensees (21 March 2022).
⁷Ibid.
⁸Corporations Act 2001 (Cth), ss 911A, 911B.
⁹ASIC, Regulatory Guide 274: Product design and distribution obligations 2020.
¹⁰Corporations Act 2001 (Cth), s 912A.