The Financial Conduct Authority outlined the fresh guidance for so-called ‘finfluencers’, users who advertise financial products on social media platforms like Instagram or TikTok, in a 47-page report on March 26. — Reuters
A top UK regulator warned social media influencers that they face as long as two years in prison if they don’t provide proper risk warnings when pitching consumers on financial products.
The Financial Conduct Authority outlined the fresh guidance for so-called “finfluencers”, users who advertise financial products on social media platforms like Instagram or TikTok, in a 47-page report on March 26. The move follows a period of consultation within the industry.
The agency said the new rules even apply to communications that originate outside the UK if it is capable of having affect in the country. Breaching the rules is considered a criminal offence, with violators facing as much as two years in prison, an unlimited fine or both.
“Promotions aren’t just about the likes, they’re about the law,” Lucy Castledine, director of consumer investments at the FCA, said in a statement on Tuesday. “We will take action against those touting financial products illegally.”
These influencers and the companies that back them have become a growing concern for the Financial Conduct Authority. The FCA asked firms to amend or remove 10,000 promotions last year – 17% more than in 2022 – as it targets a growing number of Internet personalities posting ads that break its rules.
For the finance industry, though, partnering with these influencers has historically been a no-brainer. The users typically have direct access to a wide demographic, particularly at a time when retail investing and use of financial technology apps has skyrocketed.
The latest guidance applies to influencers who are paid by a company to promote their financial products as well as those who do so on an unauthorised basis.
The agency said on sites that rely on short-form video content like TikTok, the risk warning must clearly be displayed prominently throughout the promotion. Including the warning in the caption, mentioning it in the dialogue of the video or using flashing text to display it would not comply with the FCA’s expectations, the guidance states.
Similarly, on social media posts with multiple photos like an Instagram carousel post, the risk warning must be contained on every slide, the agency said. Simply including it on the last slide or making the risk warning significantly smaller than the other text in the advertisement would also fall short of the agency’s guidance.
“Social media will not always be the best place to promote complex products,” the FCA said on Tuesday. “Firms need to consider whether a platform that offers limited characters or space is the right place to do so.” – Bloomberg
