Britain’s financial watchdog has interviewed 20 social media influencers under caution, as it clamps down on “finfluencers” who may be touting financial services products illegally.
The 20 were interviewed voluntarily using the Financial Conduct Authority’s criminal powers. Potential penalties include fines and imprisonment of up to two years.
In this case, the FCA has focused on finfluencers – celebrities who use their social media platform to promote financial products – who are touting foreign exchange and contracts for difference (CFD) trading. CFDs are a high-risk investment product used to bet on the price of an asset, in this case the price of foreign currencies.
The FCA is also concerned that finfluencers are promoting on an unlawful basis in other areas, such as credit lending and debt solutions, and is continuing to carry out searches to identify and take action against those who promote financial products or services without appropriate permissions.
In addition, the watchdog has issued 38 alerts on its warnings page against social media accounts operated by finfluencers that may contain unlawful promotions.
Growing numbers of young people are falling victim to scams, and finfluencers may play a part, with a big rise in their numbers in recent years. Nearly two-thirds (62%) of 18- to 29-year-olds follow social media influencers, and 74% of those said they trusted their advice. Nine in 10 young followers say they have been encouraged to change their financial behaviour by an influencer, the watchdog said.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: “Finfluencers are trusted by the people who follow them, often young and potentially vulnerable people attracted to the lifestyle they flaunt.
“Finfluencers 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.”
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Natalie Sherborn, a partner at the law firm Withers, said: “The latest action demonstrates that the FCA are taking the social media threat seriously and prepared to take criminal enforcement action decisively and at pace; individuals and firms should take heed.”