FCA Further Crackdown on Illegal ‘Finfluencers’
We previously reported on The Financial Conduct Authority (FCA)’s charges against several well-known influencers for the unauthorised communications of financial promotions and their imminent trial dates.
The FCA has now intensified its efforts to regulate financial influencers, popularly nicknamed ‘finfluencers’, who promote financial products and services on social media platforms without the proper authorisation. This recent crackdown aims to protect the consumer from misleading financial advice and ensure that all financial promotions comply with regulatory standards.
The Rise (and Fall) of Finfluencers
Finfluencers have gained significant popularity in recent years amongst younger online audiences, by sharing financial advice and promoting investment opportunities on platforms like Instagram, Tik Tok and YouTube. Whilst some finfluencers may provide valuable insights, many lack the necessary qualifications and regulatory approval which can lead to potential risks for their followers.
Under the Financial Services Markets Act 2000 (FSMA), it is illegal to promote financial products or services without FCA authorisation. The law mandates that any financial promotion must be communicated or approved by an authorised person, which most finfluencers are not. Violations of the law under FSMA can result in severe penalties, as previously reported, and can include unlimited fines and up to two years imprisonment.
The FCA has recently interviewed a further 20 finfluencers under caution, utilising its criminal powers to investigate potential breaches of FSMA. These interviews are part of a larger effort by the FCA to take decisive steps in addressing the issue of illegal financial promotion. Additionally, the FCA have issued 38 alerts against social media accounts suspected of unlawful promotions indicating that many more finfluencers could face similar charges to those already handed out to popular reality tv stars earlier this year.
These alerts should serve as serious warnings to both influencers and consumers about the potential risks associated with giving, and taking, unregulated financial advice.
Consumer Protection Focus
The primary concern of the FCA, and the driving force of the action against finfluencers, is consumer protection, particularly the protection of young and /or vulnerable individuals who are more likely to trust and act on the ‘advice’ finfluencers are dishing out on social media.
Data from the FCA published in October 2024 indicates that 62% of 18 to 29 year olds follow social media influencers, and 74% of those followers blindly trust the financial advice given on social media platforms, often without verifying the legitimacy of the information provided. This trust can, and has, led to consumers suffering significant financial losses if the advice is misleading or the promoted products are high risk.
To safeguard consumers, the FCA advises individuals to:
- Verify Authorisation: always check the FCA register and warning list before making any financial decisions. This ensures that the financial promotions are communicated or approved by authorised persons.
- Use Reliable Resources: visit the FCA’s InvestSmart page, which offers resources and guidance on safe investing practices. This can help consumers make informed financial decisions.
- Be Sceptical of Social Media Advice: approach financial advice on social media with caution. Verify the credentials of the finfluencer and cross-check the information with reliable sources.
The Importance of Regulatory Oversight
The FCA’s crackdown on illegal influencers underscores the need for stringent regulatory oversight in the digital age. As the influence of social media continues to grow, ensuring that financial promotions are fair, clear and not misleading is crucial. Finfluencers must adhere to legal requirements to both maintain the integrity of financial advice but also to safeguard the interests of their followers.
