TikTok influencers could face jail time for offering financial advice
TikTok and Instagram influencers who discuss financial products face hefty penalties including jail time if their content breaches financial services law, the corporate regulator has warned.
The information sheet follows confirmation from ASIC chair Joe Longo last year that the regulator was concerned with the conflation of personal and general advice in the online influencer space and with consumers turning to influencers for financial advice.
INFO 269 Discussing financial products and services online outlines the requirements of influencers and the licensees using them for exposure, including case studies to clearly identify the circumstances in which they may find themselves in trouble.
ASIC recommends influencers consider whether they need an AFSL to promote financial products, are familiar with relevant regulatory guidance surrounding promotion and dealing of financial products and to do their due diligence on the people or companies paying for their services.
On financial product advice, ASIC state: "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."
In instances of dealing by arranging, ASIC says this depends on the extent of an influencer's involvement in making the transaction happen.
"You promote a link for your followers to access an AFS licensee's trading platform to trade financial products. It's a unique link that can't be accessed anywhere else. You receive a payment from the licensee for each click-through resulting in use of the platform. People that access the link also receive a benefit when buying the products because of your unique link," ASIC's example reads.
"You're actively involved in making the transaction happen. The unique link benefits you and adds value for your followers who access the link. This is likely to be dealing by arranging."
ASIC also warned influencers on the laws regarding misleading or deceptive conduct, including the fact that they don't need to be licensed to breach these provisions.
"Any statement you make should be true, accurate and able to be substantiated. If you make a prediction, such as a future return or level of risk, you must have reasonable grounds for supporting that prediction," the guidance states.
"It doesn't matter whether or not you intend to mislead people - it's about the overall impression your post creates when it's viewed, and if your post is in fact misleading, or likely to mislead a member of the audience your post reaches (not the audience you would like to have)."
Licensees who use influencers for promotional purposes should also do their due diligence, ASIC says.
"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)," the regulator says.
Licensees must also have in place appropriate risk management and monitoring systems, sufficient compliance resourcing for that risk management and monitoring, and must consider whether they've asked an influencer to promote a product that is subject to the design and distribution obligations and taken steps to ensure the product is only promoted to the product's target market.
"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," ASIC commissioner Cathie Armour says.
"If they don't, they risk substantial penalties and put investors at risk."
Research undertaken by ASIC last year found that 33% of Australians aged 18-21 follow at least financial influencer online. It also found that 64% of young people changed at least one of their financial behaviours after following a finfluencer.
Despite this, and on the same day Longo aired his concerns about finfluencers, minister for financial services Jane Hume said the government will not help those consumers that do fall victim to a finfluencer's advice, saying that would be "perpetuating a nanny state culture".
"There's never an excuse for that [misleading or scamming]. But the existence of a small number of unscrupulous actors doesn't justify wholesale constraints and policing and freedom of expression for everyone," Hume said at the time.
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