In a significant move to regulate the growing trend of financial influencers, the UK’s Financial Conduct Authority (FCA) has interviewed 20 social media influencers under caution.
The investigation focuses on “finfluencers,” influencers who promote financial services without proper authorization, posing risks to consumers. The FCA’s probe highlights the illegal promotion of high-risk financial products, including foreign exchange and contracts for difference (CFD) trading.
The UK financial watchdog has ramped up efforts to regulate the activities of social media influencers who promote financial services, particularly risky investments.
Finfluencers often encourage their followers to engage in high-risk trading products without disclosing the associated risks or obtaining the necessary regulatory permissions. CFDs, a speculative investment tool used to bet on the price movement of currencies or assets, are one of the main areas under scrutiny in this investigation.
This marks a critical moment in the ongoing social media influencer investigation, as penalties for such illegal promotions could range from heavy fines to imprisonment of up to two years.
The FCA’s actions follow a trend seen across global regulatory bodies cracking down on finfluencer activities. In 2021, Australia’s financial watchdog, the ASIC, implemented strict measures to curb similar promotions. The UK is now following suit as online platforms continue to blur the lines between genuine financial advice and paid promotions.
Industry experts warn that the rise of social media influencers in the financial sector brings with it significant risks, as followers often trust their recommendations without understanding the underlying dangers of high-risk investments.
For consumers, the key takeaway from this social media influencer investigation is to be cautious when considering financial advice from influencers. Always verify whether the person promoting a financial product is authorized by the FCA or other relevant regulatory bodies.