Social media influencers have been warned by the UK financial and advertising regulators about the risk of promoting “get-rich-schemes” like investing in cryptocurrencies and non-fungible tokens to their followers.
In a campaign launched by the Financial Conduct Authority and Advertising Standards Authority to prevent content creators from promoting investment schemes and other risky financial products.
In a joint effort with former Love Island contestant Sharon Gaffka, the watchdogs are requesting that financial influencers, or “finfluencers,” and their agents review a checklist before agreeing to brand partnerships for financial goods and services.
The executive director of markets at the FCA, Sarah Pritchard, stated, “We’ve seen more cases of influencers touting products that they shouldn’t be. They are often doing this without knowledge of the rules and without understanding of the harm they could cause to their followers.”
“We want to work with influencers so they keep on the right side of the law, as this will also help protect people from being shown scams or investments that are too risky.”
The checklist urges online celebrities to avoid making unlawful financial promotions since it is a criminal offense that can carry a maximum sentence of two years imprisonment and an unlimited fine.
ASA will take stern action by confiscating all their money invested in cryptos if online influencers break the rules by promoting cryptocurrencies and non-fungible tokens (NFTs).
The watchdogs stated that since there has been an increase in the number of investment scams, these online influencers could be “unknowingly introducing followers to criminals.”
Influencers are warned to post as adverts if they happen to receive payment in any form from the band they are collaborating with.
A financial planning expert at the wealth management firm Quilter, Rio Stedford, stated, “People naturally have a fear of missing out, and these schemes prey on this fear to get people in.”
“However, if that is the main reason for investing, then people need to re-evaluate their investment strategy.”
“There needs to be much greater understanding of what constitutes investing, trading, and gambling.”
The head of retirement policy at the investment firm AJ Bell, Tom Selby, expressed that “All too often, social media looks more like the financial wild west than a safe space to learn about sensible financial planning.”
“In the worst-case scenario, influencers could encourage followers to invest in scam schemes and end up losing everything.”
“The fact that a lot of this activity happens outside the regulated space is likely why the FCA is focusing on educating those pushing out messages to their followers.”
In 2019, the FCA warned that scammers are increasingly using social media to promote their “get-rich-quick” schemes on trading platforms. As per the data, roughly £14,600 on average was lost in cryptocurrency and foreign currency trading.
- Published By Team Timeswire