Financial advice that is provided both generally or personally requires an AFSL licence. Therefore, a finfluencer may be in breach of the Corporations Act if they are providing financial services without a licence. Affiliated companies may then also be in breach of section 79 of the CA.
What the regulatory body is trying to prevent are concerns around conflicts of interest & market misconduct.
Firms that hire finfluencers need to be conscious of the methods through which they earn an income. It is common for compensation to be based around the interactions with particular content, such as views & the number of clicks.
“Pump and dump” scams are one of the most prominent issues facing the industry. ASIC is seeing an increase in these schemes on today’s online platforms. Collectively, individuals are able to inflate the share price of a stock by excessively promoting it online. Once the price increases, they will make a profit by selling their portion of the shares.
Finance Minister Jane Hume says banning influencers is not the solution for problems like these.
“ASIC is looking into this right now and reassessing the role and impact of influencers,” Hume says.
They are seeking to engage with finfluencers, social media platforms & moderators to help them better understand their duties of responsible promotion.
RMIT's Dr Angel Zhong, a specialist in market anomalies, hails ASIC's approach. She speaks about the recognition of finfluencers by regulatory bodies & why controlling their promotions is not a straightforward task. This is due to the varying guidelines from different social media platforms & what is legally considered financial advice.
Investors seeking out an official register of financial advisers can use ASIC's Moneysmart resource which provides information about which advisors are licensed to provide advice to the retail community.
It may be said that investors need to be aware of the claims of finfluencers. There is an element of buyer beware, especially with the credibility of these individuals.