ASIC wants finfluencers to “think about your content carefully” and self-assess whether they’re providing unlicensed financial services as it homes in on those using their platform to recommend financial products.
The corporate regulator released an information paper on Monday highlighting examples of what is and isn’t acceptable for unlicensed finfluencers to say.
Discussing different investment products with no recommendation is fine. Likewise, budgeting and other money saving tips are not going to be an issue for ASIC. Misleading information – like possible returns from a product or class of products – is an issue as well as any product recommendation.
ASIC executive director for markets Greg Yanco tells Professional Planner finfluencers who intend to use social media as an income stream should be looking at obtaining an AFSL.
“Starting to receive money for the information [or] the advice you’re providing is a clue that you might need to start getting a licence,” Yanco says.
However, receiving money isn’t the only factor the regulator will look out for.
“If it’s influencing people you’re going to need a licence even if you’re not being paid,” he says.
The punishments aren’t lenient – the Corporations Act allows prison sentences up to five years for individuals and financial penalties worth millions for corporations for conducting financial services without a licence.
No blanket bans but regulator will act
In 2021, the ASIC’s ‘Young people and money’ survey found that 33 per cent of 18 to 21-year-olds follow at least one financial influencer on social media, while 64 per cent of young people reported changing at least one of their financial behaviours because of a finfluencer.
At the Association of Financial Advisers national conference last September, Financial services minister Jane Hume said she will not ban finfluencers and that people who receive bad advice from them will not be able to rely on the government for compensation.
However, the regulator has already started targeting pseudo-advisers that contravene financial services laws.
At the end of last year, ASIC sought a restraining order against the “ASX Wolf” Tyson Scholz who was alleged to have been providing training courses about trading on the stock market and offering share suggestions.
For finfluencers keen to stay on the right side of the Corporations Act, ASIC recommends referencing RG 36 (Licensing: Financial product advice and dealing), RG 234 (Advertising financial products and services (including credit): Good practice guidance), RG 244 (Giving information, general advice and scaled advice) and RG 274 (Product design and distribution obligations) for any concerns.
“If you don’t understand this you need to get legal advice,” Yanco says. “These are laws, they’re not simple.
“If you’re providing product advice or arranging for people that deal with a financial product then you’re likely to be carrying on some sort of financial service and you’re going to need a licence.”
Social media users who attempt to use phrases like “this is not financial advice” and “do your own research” will not be absolved of any oversight if they try to recommend any products.
This ties into ASIC’s crackdown of ‘pump and dump schemes’ which are social media posts being used to inflate the price of a stock so it can subsequently be sold at a premium.
“ASIC monitors select online financial discussion by influencers who feature or promote financial products for misleading or deceptive representations or unlicensed advice or dealing,” ASIC commissioner Cathie Armour said in a media release on the information paper. “If we see harm occurring, we will take action to enforce the law.”