Watchdog cracks down on social media ‘finfluencers’
Social media influencers have been warned by Australia’s financial services watchdog that they are potentially cheating their audiences.
The Australian Securities and Investments Commission (ASIC) has issued warning notices to four financial influencers, also known as “financial influencers”.
They are also suspected of providing unlicensed financial advice that may be misleading or deceptive, such as promoting claims of guaranteed returns.
As young Australians increasingly turn to social media for personal finance advice, watchdogs are trying to crack down on bad online actors before anyone gets hurt.
“If someone on social media is promising easy money or guaranteed returns, there is a risk they may be breaking the law and you could be the one losing money,” ASIC Commissioner Alan Kirkland said.
“What people see online is shaped by algorithms designed to increase clicks and engagement rather than promote accurate information.
“This means consumers are more exposed to biased or misleading content.”
Although the influencers were not named, the commission’s oversight focused on those targeting Australian investors and discussing products such as leveraged derivatives, stocks and exchange-traded funds.
According to Moneysmart research, the majority of Australians aged 18 to 28 rely on social media for financial information; More than half say they somewhat or completely trust recommendations from platforms or influencers.
ASIC has urged young Australians to study social media influencers and compare their advice with trusted, evidence-based sources.
They also need to check whether a person or business is licensed or authorized before acting on their financial information through the ASIC Professional Register Search.
Financial influencers must hold an Australian Financial Services license or act as a representative of someone who holds this license if they want to legally give advice on financial products.
Those who are unlicensed or unauthorized could face up to five years in prison or a million-dollar fine.
In December 2022, the Federal Court found that social media influencer Tyson Robert Scholz provided financial product advice on unlicensed share trading on the ASX.
He had run training courses and seminars on trading ASX-listed securities and recommended share purchases, charging up to $1,500 for subscriptions to share trading training at different levels.
Scholz was banned from conducting a financial services business in Australia and ordered to pay ASIC $450,000 in prosecution costs.
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