The City regulator has issued a warning to 'finfluencers', urging them to verify the products they endorse to ensure they are not violating the law or jeopardising their followers' finances.
nfluencers often utilise their platforms to promote financial products and share insights and advice with their followers. The Financial Conduct Authority (FCA) noted a significant surge in finfluencers in recent years. However, it raised concerns about individuals who are not FCA-authorised and lack the qualifications to provide financial advice to their typically young and impressionable audience.
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The FCA revealed that 20 unnamed finfluencers are currently being interviewed under caution. Additionally, the FCA has issued 38 alerts against social media accounts run by finfluencers, which may contain illegal promotions.
According to the regulator, nearly two-thirds (62%) of 18 to 29-year-olds follow social media influencers, with three-quarters (74%) of those trusting their advice and nine out of ten young followers claiming they have been inspired to alter their financial behaviour. As part of its ongoing efforts, the regulator is investigating finfluencers promoting foreign currency and contracts for difference (CFD) trading.
CFDs are investment products used to speculate on the price of an asset, such as foreign currencies. The FCA has concerns about the promotion of credit options and debt solutions without proper authorisation. Steve Smart, the FCA's joint executive director of enforcement and market oversight, said: "Finfluencers are trusted by the people who follow them, often young and potentially vulnerable people attracted to the lifestyle they flaunt."
"Finfluencers need to check the products they promote to ensure they are not breaking the law and putting their followers’ livelihoods and life savings at risk."
Meanwhile, Rocio Concha from Which?, the consumer watchdog's director of policy and advocacy, highlighted the potent sway of social media on users: "Social media influencers can build up a huge fanbase of millions of people who value their statements and advice and may choose to act on them – and this could prove very costly if people are encouraged to make unnecessarily risky decisions."
"The FCA is right to remind finfluencers of their legal responsibilities. The regulator should not hesitate to take action against any found to be breaking the rules, as this would send a strong message that social media influencers may be able to reap large rewards, but they will also be held responsible for their posts."
The FCA urges individuals to review their warning list prior to making investment decisions and to consult its InvestSmart page for guidance when considering investment opportunities.
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