FCA focuses on social media influencers

Feb 14, 2022 12:00:00 AM

What has happened?

In February 2022, the FCA issued a financial promotions compliance update describing its action taken in 2021 against authorised firms breaching financial promotion rules and its referrals and investigations into unregulated activity.

In the same week, in a second supervisory notice, the FCA concluded that Freetrade Ltd had breached the “fair, clear and not misleading” rules as it had failed to consider the extent to which vulnerable customers might access sponsored influencer advertisements and posts on social media platforms TikTok and Instagram.

What do you need to do?

Among other key messages addressed to firms as part of the February 2022 financial promotions compliance update, the FCA commented that;

“Retail investments’ use of social media influencers on various platforms to market investments is becoming a concern for us. Firms should ensure they have taken appropriate legal advice to understand their responsibilities prior to using influencers”.

This comment reflects the view from the top of the FCA, whose chair Charles Randell criticised social media influencers in September 2021 when he told investors to avoid taking advice from them, stating in relation to cryptocurrency when speaking at the Cambridge International Symposium on Economic Crime that “Social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all”.

The FCA concluded in its second supervisory notice that Freetrade Ltd had breached COBS 4.2.1R by failing to consider the extent to which vulnerable customers might access a financial promotion it had approved to be made by a social media influencer, in order to promote its services of commission free investments. The FCA considers that the promotions give consumers the impression that they could reduce debt by following the steps taken by the social media influencer and using Freetrade as a mechanism to make money. However, the FCA considers this to be misleading as there are no guarantees that any investment will result in positive gains in the short or long term. Consumers already in debt are likely to be particularly vulnerable to this.

This was a “repeat offence” since the FCA had previously provided feedback to Freetrade in relation to its breaches of the financial promotions rules, also in relation to social media, in March 2020 and March 2021.

How can we help you with your financial promotions compliance?

If you’d like to know more about how we can help you with your financial promotions compliance, your use of social media influencers, or with any other regulatory compliance issues, our specialist team is here to help.

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