The Financial Conduct Authority (FCA) is poised for a social media clampdown as it looks to target ‘finfluencers’ and firms flogging crypto schemes and financial products online with misleading adverts.
In a statement today, the regulator said it will roll out new social media guidance to “modernise the information firms should use when promoting financial products or services online”.
The new guidelines come as the FCA tightens the screws on the way that firms across the industry promote their products to customers. Crypto firms will be banned from using incentives like ‘refer a friend’ bonuses to customers from October, while buy-now pay-later bosses were threatened with jail time if they fail to fall in line with financial promotion rules.
Lucy Castledine, director of consumer investments at the FCA, said sweeping new social media guardrails were needed due to a “growing number of ads falling short” of the current guidance.
“We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online,” she added.
“And for those touting products illegally, we will be taking action against you.”
The FCA has also been looking to clamp down on so-called “finfluencers” who tout get-rich-quick schemes and financial tools online.
Regulators globally have been looking to stamp out celebrities peddling crypto schemes with illegal and misleading ads. In the US, the Securities and Exchange Commission slapped Kim Kardashian with a $1.26m fine for flogging a crypto security while Youtuber Logan Paul has been hit with a class-action lawsuit for raising funds for a crypto game that supposedly never existed.
As part of its clamdpown, the FCA said it has also teamed up with the Advertising Standards Authority to “help educate consumers and influencers about the risks involved in promoting financial products”.
Sarah Coles, head of personal finance at Hargreaves Lansdown said the “Wild West of social media ‘finfluencers’ has received a warning shot from the FCA” with the latest guidelines.
“It’s not so much that there’s a new sheriff in town, it’s the same old sheriff, but they’ve laced their boots up and left the comfort of their office,” Coles added. “Among the guidance is a reminder that some of these promotions can actually constitute a criminal offence.”
The fresh rules come after the regulator said earlier this month that 58 per cent of those under 40 who have invested in high-risk investment products say hype on social media and the news lay behind their decision to invest.
FCA officials have been on a wider offensive this year amid fears that struggling Brits have been left vulnerable to predatory financial firms during a cost of living crunch.
The regulator has tabled a number of potential measures including forcing banks to ramp up savings rates and support struggling customers, and warning insurance firms not to penalise people with unnecessary add-ons.
Firms will face further scrutiny from the end of this month as the FCA rolls out its new Consumer Duty, which will ramp up the emphasis on supporting customers.