Finfluencers have been making waves in the press recently, with the first prosecution brought by the FCA against influencers regarding alleged financial promotion breaches.
The FCA has a critical consumer protection obligation, which is very important. However, it seems odd that these cases, which occurred several years ago, are only now being brought to court. It is also odd, given just how risky the investments involved were (the FCA having previously said 80% of customers lose money when investing in CFDs) and how high profile the finfluencers and their ads were, that the FCA allowed those alleged ads to continue to be published unchecked for a period of nearly three years – and nearly two years of that time being pre-pandemic.
Even though the FCA put permanent restrictions on selling CFDs to retail investors back in 2019, it feels a bit unfair that these influencers are being singled out so long after their alleged offences, especially since they might not have been told their actions were illegal at the time – the FCA’s (jointly with the ASA) guidance for finfluencers came out only last year, and the updated guidance on financial promotions on social media only came out a couple of months ago.
Going forward, it would be good to see the FCA enhance their preventative measures by taking proactive steps to make media personalities more aware of the regulations when it comes to financial promotion, so that they can avoid making the same mistakes and so that consumers can be protected in real time rather than post-event having spent money on high risk investments. This would also enable the FCA to use its resources more effectively – focussing on investigating and sanctioning misconduct that is truly only discoverable and identifiable post-event.
It is also no coincidence that the defendants are high-profile to the point that the charges put to them, as we have seen, have garnered significant press attention. We’re seeing regulatory bodies, and indeed government, use the power of naming and shaming both as a deterrent and as a way to gain visibility for enforcement proceedings.
Negative media coverage is being used both as a route to raising awareness of the rules and the approach taken by the regulator, as well as essentially a punishment in itself for brands and individuals which trade on their public persona.
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Social media influencers with a combined Instagram following of 4.5 million people have been charged in relation to promotions of unauthorised investments.
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