The Australian regulator reminded companies to be mindful of the regulatory risks associated with engaging with financial influencers, commonly known as “finfluencers”.
Finfluencers can accumulate a lot of online followers and collaborations with them can seem like a quick and effective way to promote issued securities to the next generation of young retail investors.
However, ASIC cautioned companies to do their due diligence when seeking or being approached by a finfluencer as they may be contributing to regulatory risks such as licence issues, conflict of interest and market misconduct.
Only individuals or corporations who hold Australian Financial Services (AFS) licence can provide financial advice by law. Most finfluencers do not hold such licence and if they are found to be running a financial services business without being authorised representatives of an AFS licensee, they may be in breach of the Corporations Act 2001. And the company that engages with them, may also be held responsible.
Finfluencer can engage with multiple corporations simultaneously. Their income can come from content clicks or views, which may lead to a conflict of interest or result in financial advice that is not in the consumers’ best interests.
The Aussie regulator noted that lately there has been a rise in “pump and dump” schemes. Finfluencers, social media or online forums can be used in such schemes. ASIC noted that it monitors the market for such activity and will act when it sees extreme price movement. It cautioned companies aware the unintended risk that may result from finfluencer collaboration.
The Aussie financial markets regulator recently released guidance for product issuers and market operators on how they can comply with the regulatory obligations regarding crypto-asset exchange traded products (ETPs) and other investment products.
