Ruling on finfluencer highlights desperate need for advice

Earlier this week, the Federal Court found social media ‘finfluencer’ Tyson Robert Scholz contravened s 911A of the Corporations Act by carrying on a financial service business (between March 2020 and November 2021) without an Australian financial services licence.

Reacting to the court’s decision, Angel Zhong, a senior lecturer at RMIT University, applauded the outcome.

Speaking to ifa, Ms Zhong said: “First, it reinforces ASIC’s regulatory guidance in April this year that is known to warn finfluencers who provide unlicensed financial advice on social media”.

“When a finfluencer recommends a specific financial product or asset, it is very likely that this will influence the investment decision of his/her followers,” she explained.

Second, Ms Zhong said, “the fact that finfluencers can impact followers’ financial decisions highlights that Australians need quality and affordable financial advice”.

“Hungry for financial advice, investors who can’t afford formal financial advice have to resort to unlicensed finfluencers. It is imperative to build a robust and effective financial advice system in Australia to safeguard the financial wellbeing of our society,” Ms Zhong opined.

In publicising the court’s decision, the corporate regulator explained on Tuesday that it alleged Mr Scholz was carrying on a financial services business by providing financial product advice, regarding share trading on the ASX, without a licence.

The regulator further alleged that Mr Scholz engaged in various areas of financial services by delivering training courses and seminars about trading in ASX-listed securities, during which he made recommendations about share purchases; promoting those courses and seminars on Twitter and Instagram; and by making share purchase recommendations on private online forums (that he administered) and on Instagram.

“ASIC has warned those who discuss financial products and services on social media that they could be the subject of enforcement action if they are carrying on a business of providing financial services without a licence,” said ASIC deputy chair Sarah Court.

“Financial services laws exist to protect investors if something goes wrong. The individuals who paid Mr Scholz for his tips, to attend seminars or access private online forums, as well as those individuals who purchased shares based on his recommendations or statements of opinion, did not have the benefit of these protections.”

The matter will be listed for a case management hearing on 31 January 2023 to progress to a further hearing to determine remaining issues, including any orders restraining Mr Scholz from carrying on a financial services business without a licence.

ASIC wants to see Mr Scholz prohibited from promoting or carrying on the business of providing recommendations or statements of opinions about the purchase of shares in return for payments of money or other benefits.

Moreover, the corporate regulator is asking for Mr Scholz to be barred from directly or indirectly carrying on any financial services business in Australia, as well as from receiving, soliciting, transferring or disposing of customer funds received in connection to providing recommendations or opinions about the purchase of shares.