Noting that while finfluencer collaboration may seem like a “fast, effective way” to promote issued securities to the next generation of retail investors, ASIC commissioner Cathie Armour cautioned of regulatory risks in a recent paper.
“If you’re approached by a finfluencer seeking to collaborate, or you’re considering reaching out to one, make sure you do your due diligence as they may be contributing to your regulatory risks,” Ms Armour said.
Social media influencers spruiking stock tips and crypto assets have garnered increasing attention among young retail investors, with the government confirming earlier this year it will not be stepping in to police this online advice environment.
But in this most recent paper, the corporate regulator appeared to be putting the onus on corporations engaging these so-called finfluencers, many of whom may be in breach of the Corporations Act 2001.
“If a corporation engages a finfluencer who breaches the law by providing unlicensed financial advice, the corporation may also be in breach under section 79 of the Act,” Ms Armour said.
Ms Armour also pointed to an increase in attempted market misconduct, such as “pump and dump” schemes, where promoters buy shares in a company and then start an organised program of increasing, or “pumping”, the share price.
“They may do this via finfluencers, social media or online forums to generate a sense of excitement. As more people buy in, its value rises and other traders latch on, further boosting the price. The promoter then sells – “dumps” – its stake in the now-overvalued security, causing its value to collapse,” Ms Armour said.
“It is important for companies to be aware of these types of misconduct-related risks and their potential for unintended consequences arising from finfluencer collaboration.”
Ms Armour confirmed ASIC is engaging with social media platforms and their moderators, as well as with finfluencers, about their responsibilities and the limits of acceptable promotion.
“We are also undertaking a review of selected finfluencers to understand their business models and how the financial services law applies to this activity,” Ms Armour said.
I think the statement has been misquoted. Nonsensical and illegal. The Corporations Act 2001 legislation does not allow such discretion. ASIC fails to understand that the act itself is above finfluencers and ASIC themselves. They will be scurrying the moment we have a test case which will likely be their demise, much like what has happened to FASEA.
Could ASIC be anymore useless. The acknowledge that there is a decent possibility of consumer harm and instead of doing something about it they push the onus to someone else. What a incompetent and lazy organisation. Can someone actually explain what ASIC does to protect consumers because banning licensed advisers for not providing a current FSCG isn’t helping anyone.
So you are asking a business to review the referral source for sales and hopefully they say ‘no we don’t want your referrals’. Really? I’d love to say more but I’m busy with TMDs, FASEA, BID, SOA, ROA, and yearly Service Agreements. I wish I could say I’m surprised.
So ‘finfluencers’ can go on their merry way spruiking financially conflicted products. But if licensed advisers collab with one, we’re in the firing line. Good one ASIC, seems 100% legit.