Illegal Finfluencers: FCA’s Crackdown on Financial Promotions on Social Media

The rise of social media as a powerful platform for influencing financial decisions has brought with it significant risks, especially when it comes to "finfluencers" social media personalities offering financial advice or promoting investment products. While these influencers may have the trust of their audiences, the UK's Financial Conduct Authority (FCA) has made it clear that unauthorised financial promotions by these individuals can be both illegal and harmful.

The FCA’s Crackdown on Finfluencers

Recently, the FCA launched a major crackdown on illegal financial promotions, with twenty finfluencers being interviewed under caution and 38 alerts issued against social media accounts for potential violations. The FCA’s enforcement actions stem from concerns that a growing number of young people are falling victim to financial scams fuelled by finfluencers. Shockingly, 62% of 18- to 29-year-olds follow financial influencers, and nearly three-quarters (74%) of them trust the advice they receive online.

Steve Smart, joint executive director of enforcement and market oversight at the FCA, explained the danger: "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."

The FCA's warnings have highlighted the legal requirement that financial promotions must be FCA-approved or carried out by an FCA-authorised person. Unauthorised individuals promoting financial services are not only misleading the public but may also be committing a criminal offence.

FCA Guidance on Social Media Financial Promotions (FG24/1)

In March 2024, the FCA released Finalised Guidance FG24/1, which sets out clear expectations for firms, influencers, and marketers promoting financial services on social media. This guidance is an important step to address the growing risks posed by online financial promotions.

Key Points from FG24/1

• Technology-Neutral Rules: The FCA’s rules are technology-neutral, meaning they apply equally to financial promotions across all platforms, including social media. The FCA emphasises that financial promotions must be clear, fair, and not misleading, adhering to the Consumer Duty that mandates firms to communicate in ways that support customer understanding and informed decision-making​.

• Responsibility of Firms: Firms that use influencers or affiliates to promote financial products must take full responsibility for the content and legality of these promotions. Each promotion must be standalone compliant, meaning it should meet all regulatory requirements without relying on external context​. This includes clear, balanced messaging about both risks and benefits, especially for complex or high-risk products.

• Affiliate Marketing and Influencers: Influencers promoting financial services—whether for direct payment, affiliate commissions, or personal gain—are subject to the FCA’s rules. Unauthorised individuals or firms communicating financial promotions without FCA approval could be committing a criminal offenses​. Influencers must understand the products they promote and ensure they are compliant with relevant regulations.

• Risk Warnings: Promotions involving high-risk investments, such as cryptocurrency or contracts for differences (CFDs), must include clear and visible risk warnings. The guidance specifies that social media features, such as truncated text (e.g., ‘see more’), must not obscure essential warnings. These risk disclosures should be present throughout the promotion, ensuring that consumers understand the risks before taking action​.

• Targeting Vulnerable Customers: The FCA stresses the importance of avoiding exploitation of vulnerable customers, particularly on platforms where behavioural biases can be manipulated. Firms and influencers must ensure that their promotions do not target individuals with characteristics of vulnerability in ways that could harm them financially​.

• Suitability of Social Media: The FCA emphasises that some financial products, due to their complexity, may not be suitable for promotion on platforms with limited space or character counts (e.g., Twitter). Firms are encouraged to evaluate the appropriateness of each platform and consider whether using such channels can support consumer understanding effectively​.

Protecting Consumers from Financial Harm

The FCA has made it clear that financial promotions on social media must be responsible, ensuring that consumers are properly informed about the risks associated with any financial product. The guidance requires influencers and firms to assess whether social media is suitable for communicating complex financial products and to consider consumers’ needs when designing these promotions.

To further protect consumers, the FCA encourages individuals to check its warning list before engaging with any financial promotions they encounter online. The FCA’s InvestSmart campaign also provides guidance to help consumers make smarter, safer investment decisions.

The Risks of Unregulated Financial Advice

Finfluencers may seem trustworthy to their followers, but without proper authorisation or oversight, the advice they offer can lead to significant financial losses. The FCA's actions underscore the importance of verifying the credentials of anyone offering financial advice or promoting investments. As unauthorised promotions become more prevalent, especially in the realm of high-risk investments like crypto-assets, the need for consumer vigilance is more critical than ever.

The FCA’s crackdown on illegal finfluencers and its updated guidance on financial promotions offer a much-needed safeguard for consumers. Finfluencers and firms alike must ensure they comply with financial promotion regulations to avoid legal repercussions and protect their audiences from financial harm.

For anyone engaging with financial promotions online, the key takeaway is clear: do your homework, verify the source, and ensure the financial services being promoted are legitimate. The FCA’s actions and guidelines are a crucial step towards making the online financial space safer for everyone.

Resources:

• FCA’s InvestSmart Page

• FCA’s Warning List

Stay informed, stay protected.