The Australian Securities and Investments Commission (ASIC) has outlined how the law applies to financial influencers, and the licensees who use them.
In particular, the corporate watchdog highlighted activities where finfluencers may contravene the law if they were unaware of the legal requirements when discussing financial products and services online.
This included financial product advice, dealing by arranging and misleading or deceptive conduct.
The rules also affected Australian financial services licensees who worked with finfluencers.
The regulator said: “You may be liable for misconduct by influencers you use, so make sure you:
- Do your due diligence. If the influencer is acting on your behalf, and is therefore your ‘representative’ for the purposes of the financial services laws, this triggers other obligations (including ensuring they are adequately trained and complying with the financial services laws);
- Put in place appropriate risk management systems and monitoring processes to make sure the influencers you are using are not providing unlicensed financial services;
- Have sufficient compliance resourcing to monitor the influencers you use; and
- Consider if you have engaged an influencer to promote a financial product that is subject to the design and distribution obligations and whether you have taken reasonable steps so that the influencer only promotes the product to consumers in the target market.”
Looking specifically at finfluencers and financial product advice, ASIC said: “You can share factual information that describes the features or terms and conditions of a financial product (or a class of financial products) without giving financial product advice.
“However, if you present factual information in a way that conveys a recommendation that someone should (or should not) invest in that product or class of products, you could breach the law by providing unlicensed financial product advice.
“If you’re an influencer who receives benefits or payment for your comments in relation to financial products, you're more likely to be providing financial product advice because it indicates an intention to influence the audience."
Examples of content which were likely to be financial product advice were “I’m going to share with you five long-term stocks that will do well and which you should buy and hold” or “ETFs will make you a guaranteed positive return”.
However, descriptions of different assets without any recommendation or tips on money saving or budgeting were not classed as advice.
Finfluencers should also consider whether they needed an AFS licence, be familiar with relevant regulatory guidance and doing their due diligence on who they were paid by (including non-monetary benefits).
ASIC commissioner, Cathie Armour, said: “The way investors access information is changing. It is crucial that influencers who discuss financial products and services online comply with the financial services laws. If they don’t, they risk substantial penalties and put investors at risk”.
In 2021, an ASIC survey found that 33% of 18-21 year olds follow at least one finfluencer on social media. A further 64% of young people reported changing at least one of their financial behaviours as a result of following a finfluencer.