ASIC is ‘enterprise a evaluate’ of some Australian finance influencers
The Australian Securities and Investments Commission (ASIC) announced that it is conducting a review of “selected” financial influencers on TikTok and other social media platforms amid a boom in online financial content.
This follows on from statements by the Corporate Watchdog in June, in which the activities of financial influencers were marked as “worrying”.
The watchdog is also considering updating its regulatory guide on internet talk pages to clarify the rules for engaging with finfluencers on social media.
ASIC confirmed that it is reviewing the activities of some “finfluencers” in response to a question asked at the recent ASIC oversight hearing asking whether the regulator had an overview of TikTok financial influencers or compliance measures performs.
“We are currently conducting a review of selected finfluencers to understand their business models and the application of the Financial Services Act to this activity,” ASIC replied.
“Our selection of finfluencers is not specifically targeted at TikTok, although it will be included in the review as we find that some of the finfluencers are present on TikTok.”
Social media platforms and discussion forums are increasingly being used by influencers to create a range of financial content, from general advice on saving, to crypto tokens.
Closed apps like the Telegram messaging platform are also used to promote pump-and-dump programs designed to encourage mass investment in a particular stock.
At the hearing, ASIC also said it was clear that “some of the finfluencers appear to provide advice and are paid by other financial product providers to promote their products,” reiterating that most do not have an Australian financial services license, which requires them to be honest and fair to act and provide a capital buffer in the event of an investor loss.
“We fear that inexperienced investors are increasingly reacting to financial advice from unlicensed providers,” said ASIC.
“This can lead to conflicting or bad advice for users who may experience financial loss.”
The review of ‘finfluencers’ is tightening
The declarations come amid a surge of new entrants into traditional and crypto markets, which is sidelining regulators in an attempt to enforce rules on financial influencers created without them.
Data from Finder shows that a total of around 2.5 million Australians first started investing during the pandemic, with many turning to cryptocurrency.
According to the Australian Stock Exchange’s 2020 Investor Study, there has been an influx of younger investors into the market over the past two years, with a quarter of the youngest new investors between the ages of 18 and 24.
In June, ASIC chairman Joe Longo said “social media influencers providing financial advice” was a “big topic” and “area of great concern” for the agency.
ASIC Commissioner Danielle Press said at the time that the regulator was “looking very carefully and” considering unlicensed advice on social media.
This year, several cases highlighted loopholes in the regulation of financial advice by individuals on social media.
In June, a TikTok influencer was called for using his platform to promote the Hushcoin crypto token to his followers on TikTok, Instagram and OnlyFans, possibly in violation of ASIC rules.
And in August, the Australian Financial Review reported that a cryptocurrency investor sued a New Zealand-based cryptocurrency influencer for half a million dollars, claiming he had been misled into investing in a speculative crypto project.
Reports around the world have exposed YouTubers with a large fan base on platforms such as YouTube who participate in “pump-and-dump” programs.
Most recently, an ASX-listed Penny stock rose after members of two ASX pump-and-dump groups targeted the stock in groups on Telegram.
The ‘finfluencer’ perspective
Queenie Tan and Aleks Nikolic, two women who run popular investment and financial literacy social platforms, told Business Insider Australia in July they agreed that more oversight was needed in this area.
Tan said she believed that more regulation would improve the integrity of good actors.
“There are a lot of positive people in this field,” she said, and she believes there is a clear difference between Spruikers and those who provide tools for financial literacy.
Nikolic shared this view, but said she was concerned that regulation could deter laypeople from sharing helpful general and education-funded content on the platform.
“Where I see the limit is that I don’t want young women who are transparent about money to go away for fear of regulation,” she said.
“ASIC has a really tough job, on the one hand, to regulate the really outrageous misconduct and to clarify the regulation. But on the other hand, the realization that it should be a value-based approach. “
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