July 18, 2023 at 12:27 GMTModified date: August 9, 2023 at 10:04 GMT
July 18, 2023 at 12:27 GMT

FCA targets unpaid social media influencers

A guidance consultation released yesterday by the UK’s FCA titled ‘Financial promotions on social media’ seemingly includes unpaid crypto influencers…

FCA targets unpaid social media influencers

A guidance consultation released yesterday by the UK’s Financial Conduct Authority (FCA) titled ‘Financial promotions on social media’ seemingly includes unpaid crypto influencers in its purview.

The FCA’s new set of guidance would now apply to “influencers and unauthorised persons communicating financial promotions on social media”, along with others like industry groups and trade bodies. As a result, these people may be breaking the law if they fail to get appropriate approval from the regulatory authority.

The authority also noted a substantial increase in financial influencers, also known as ‘finfluencers’, on social media promoting financial products, particularly investment and credit products. A majority of them target younger consumers, who are likely to trust the information influencers provide them with.

Stating the “lack of expertise” in them, the consultation stated: “In recent years we have observed the rise of ‘finfluencers’ with 62% of 18- to 29- year-olds following social media influencers and 74% saying they trust their advice. As a result, 9 in 10 young followers have been encouraged to change their financial behaviour. This has been coupled with a substantial rise in influencers being used by firms to promote financial products and services. Often these influencers have little knowledge of what they’re promoting.”

The guidance also included the influencers who are not paid directly by the firm, but post online with the hope of being hired later to fall within the scope of promotion rules. It gave a warning to all the influencers who fall within the scope of these rules as they would need to make sure that their promotions are fair and not misleading.

The FCA is using this guidance “to tackle harm occurring from unauthorised influencers communicating illegal financial promotions”. It also mentioned the wider regulation on advertising online set out by the Advertising Standards Authority (ASA) that firms and influencers need to be aware of.

Talking about this recently published update on the expectations of influencer advertising, the FCA stated: “If an influencer receives payment or any other incentive from a brand, or they are otherwise personally or commercially connected to the brand, any content featuring or referring to the brand will need to be obviously identifiable as advertising. More broadly, firms and influencers should make sure they have familiarised themselves with the UK Code of Non-broadcast Advertising and Direct and Promotional Marketing (the CAP code).”

On top of this, the consultation reminded that firms and influencers must also be wary of additional requirements or restrictions beyond what is set in this guidance. This includes things like a social media platform’s own policies for promotion.

The promotion rules for the crypto sector were published by the FCA back in June. Stating that crypto companies required clear risk warnings with their ads, it also declared a ban on promoting products using financial incentives like airdrops.

Once the new financial promotions regime becomes a reality in October, crypto companies will be allowed to approve their own ads for a limited time. However, for this, the companies will have to register with the country’s financial watchdog under its anti-money laundering regime.