It is hard to imagine a world without social media. Its growth in a relatively small-time frame has permeated through every aspect of our every life.
Whilst social media allows us to have almost instant access to news and information, the social media influencer utilises often several types of social media to express their opinions on specific topics, brands etc. These influencers can be incredibly powerful and influential when a person is making a decision.
In the financial advice and financial product world, influencers are becoming ever increasingly important on how people make decisions.
Look at Elon Musk – people hang on his every word and he can have a dramatic effect on a company, the stock market and forms of financial products.
In Australia we have Financial Services Laws that protect investors and work to ensure that our markets operate ethically, efficiently and within the law.
The Australian Securities and Investments Commission (ASIC) regulates the industry and ensures compliance.
ASIC monitors influencers who discuss or promote financial products for any misleading or deceptive representations or unlicensed financial services.
In Australia to carry on a financial services business without an Australian Financial Services Licence (AFSL) is an offence under the Corporations Act 2001 (Act) unless you are authorised as a representative of an AFSL holder or have an exemption. Significant penalties apply.
In recent times ASIC has turned their focus to influencers and has issued a comprehensive information sheet.
“In 2021, the ASIC young people and money survey found that 33% of 18-21 year olds follow at least one financial influencer on social media. The survey found a further 64% of young people reported changing at least one of their financial behaviours as a result of following a financial influencer”
The information sheet can be found here.
ASIC outlines how influencers may contravene the law and provides a lengthy set of examples relating to:
- financial product advice
- dealing by arranging
- misleading or deceptive conduct
ASIC goes into detail about what influencers need to consider including:
- whether they need an AFSL
- how to understand the relevant regulatory guidance
- undertake due diligence on people who are paying them which can also include non-monetary benefits
Importantly AFSL holders must ensure if they intend using an influencers that they have:
- done their due diligence
- risk management systems and monitoring processes in place
- ensure sufficient compliance to monitor the influencer is in place
- considered their design and distribution obligations.
It is important to remember that this does not just apply to AFSL holders who use influencers but equally to influencers who do not think they are caught by the AFSL regime.
ASIC Commissioner Cathie Armour has bluntly said the organisation is cracking down on these individuals:
“ASIC monitors select online financial discussion by influencers who feature or promote financial products for misleading or deceptive representations or unlinked advice or dealing.”
So be warned this type of compliance monitoring by ASIC will only increase and this was backed up by the ASIC Chair Joseph Longo who said:
“We are making it clear to social media content creators and the public that there is a clear legal difference between advice and opinion”
So if you consider yourself an influencer or you are a an AFSL holder and use an influencer make sure you do not flout Australia’s Financial Services legislative regime. It could be a costly mistake and reputationally damaging.
It can be a grey area between providing and advice and opinion as compared to providing information and facts.
How can FC Lawyers help?
At FC Lawyers our experienced Business and Corporate team have years of experiencing advising companies and individuals in relation to Financial Services Laws and dealing with ASIC.
Contact our team today to discuss your legal matter.
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