Curbing the influence of ‘finfluencers’: ASIC issues warnings to social media influencers and AFS licensees

By Michelle Eastwell, Vince Battaglia and Grace Baty

In an interesting application of financial services laws to developments in social media platforms, ASIC recently issued an Information Sheet Discussing financial products and services online (INFO 269) targeted at social media influencers who discuss financial products and services online. The Information Sheet is a stern warning to social media influencers, and those who use social media influencers to promote their financial products and services, to ensure their content complies with the Corporations Act 2001 (Cth) and other financial services laws.

The warning comes following a recent ASIC review of young people’s experience and attitudes to money. ASIC’s report, Young People and Money – Survey Snapshot, states that 28% of young people indicated that they followed at least one financial influencer (of ‘finfluencer’) on social media, with a large proportion of those young people having changed their financial behaviour as a result.

In the Information Sheet, ASIC cautions that carrying on a financial services business without an Australian financial services licence is an offence, and unless you are authorised as a representative of an AFS licensee or another exemption applies, you may be liable to significant penalties. These include up to five years’ imprisonment for an individual and financial penalties into the millions of dollars for a corporation.

In light of the severe consequences stemming from a breach of the laws, ASIC has reminded influencers to think about their content carefully, and to consider whether they are providing unlicensed financial services, such as providing financial product advice or dealing by arranging. ASIC has also provided a number of simplified case studies to assist influencers in understanding their obligations.

Under the Corporations Act, financial product advice is defined as a recommendation or statement of opinion or a report that:

• is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or
• could reasonably be regarded as having intended to have such an influence.

This is a question of fact, meaning there is no necessary component that viewers are actually influenced to make a particular decision as a result of the advice. For influencers, merely stating that you are not a financial adviser, or that your content is not financial advice, will not be sufficient to avoid a breach.

Apart from being authorised to provide financial services, what is permitted by the law is sharing factual information that describes the features or terms and conditions of a financial product without giving financial advice.

Therefore, influencers (and AFS licensees that sponsor them) need to exercise particular caution in how they present information. If it is presented in a way that coveys a recommendation that someone should (or should not) invest in a product, it could constitute financial product advice.

Further, ASIC’s view is that if you receive benefits or payments for your comments about a financial product, you are more likely to be providing financial product advice as such benefits indicate an intention to influence the audience.

It is also important for an influencer to ensure that the content they share is accurate and balanced and is not misleading or deceptive in relation to financial products or services.

Another area of risk to influencers is sharing content which constitutes dealing in financial products by arranging. This will depend on the extent of an influencer’s involvement in making the transaction happen but could, for example, be triggered where an influencer promotes a unique link to a trading platform to trade financial product with payment in return for each click-through resulting in use of the platform.

ASIC has warned influencers engaging in this space that they should consider whether they need an AFS licence (or otherwise be appointed as an authorised representative or rely on some other exemption), ensure they are familiar with ASIC’s regulatory guidance and do due diligence on those who are engaging and paying them.

ASIC has also warned AFS licensees who use influencers that they may be liable for misconduct by influencers and as such they should do their due diligence, put in place risk management systems and monitoring processes and consider the application of the design and distribution obligations.

With ASIC actively monitoring select online financial discussion by influencers, it is critical that influencers who share content about financial products (as well as those who are engaging them to share content) are aware of their obligations and can comply with them.

Hall & Wilcox has extensive experience assisting companies with financial services licencing issues. If you require any assistance with these matters, please contact our team.