ASIC “Undertakes Review” of Some Australian Financial Influencers

• The business watchdog ASIC has said it is reviewing the activities of financial influencers, confirming that it is actively reviewing the proliferation of financial content on social platforms.
• He previously reported that social media influencers giving financial advice were an “area of ​​great concern” for the agency.
• The statements come amid a wave of new entrants to the financial and crypto markets.
• Visit the Business Insider Australia homepage for more stories.

The Australian Securities and Investments Commission (ASIC) said it was undertaking a review of “selected” financial influencers on TikTok and other social media platforms amid the boom in online financial content.

This follows statements made by the business watchdog in June that flagged the activities of financial influencers as an “area of ​​concern.”

The watchdog also plans to update its regulatory guide on Internet discussion sites in order to clarify the rules of engagement of “influencers” on social networks.

ASIC has confirmed that it is reviewing the activities of certain “finfluencers” in response to a question posed during a recent ASIC oversight hearing, which asked whether the regulator is undertaking a snapshot of TikTok financial influencers or undertaking compliance measures.

“We are currently undertaking a review of certain financial influencers (‘finfluencers’) to understand their business models and how financial services law applies to this business,” replied ASIC.

“Our selection of finfluencers does not specifically target TikTok, although it is included in the review as we note that some of the finfluencers are present on TikTok.”

Social media platforms and discussion forums are increasingly used by influencers to create a range of financial content, from widespread advice on savings to the creation of crypto tokens.

Closed applications such as the Telegram messaging platform are also used to promote pump and dump programs designed to encourage mass investment in a particular stock.

During the hearing, ASIC also said it was clear that “some of the influencers appear to provide advice and are paid by other financial product providers to promote their products,” and reiterated that most do not. do not hold an Australian financial services license which requires them to act honestly and fairly, and to have capital reserves set aside in the event of investor loss.

“We are concerned that inexperienced investors are increasingly relying on financial advice from unauthorized providers,” ASIC said.

“This can result in conflicting or poor advice being provided to users who could suffer financial losses. “

The examination of “finfluencers” is refined

The statements come amid a wave of new entrants to the traditional and crypto markets, which has left regulators on their backs trying to enforce rules on financial influencers built without them in mind.

Finder data shows that around 2.5 million Australians in total started investing for the first time during the pandemic, with many turning to cryptocurrency.

According to the Australian Stock Exchange Investor Study 2020, the past two years have seen an influx of young investors into the market, with a quarter of recent new investors between the ages of 18 and 24.

In June, ASIC President Joe Longo said “social media influencers giving financial advice” were a “big topic” and an “area of ​​great concern” for the agency.

ASIC Commissioner Danielle Press said at the time that the regulator was looking “very closely and considering” unlicensed advice on social media.

This year, several cases have highlighted loopholes in the regulation of personal financial advice on social media.

In June, a TikTok influencer was called out for using his platform to promote the crypto token, Hushcoin, to his followers on TikTok, Instagram and OnlyFans, potentially in violation of ASIC rules.

And in August, the Australian Financial Review reported a cryptocurrency investor was suing a New Zealand-based cryptocurrency influencer for half a million dollars, claiming he was misled into investing in a speculative crypto project.

Globally, reports have revealed that creators with large subscribers on platforms like YouTube are engaging in “pumping and emptying” regimes.

More recently, an ASX listed company penny stock jumped after members of two groups of ASX Pumps and Dumps target grouped stock on Telegram.

The point of view of “influencers”

Queenie Tan and Aleks Nikolic, two women who run popular social platforms around investment and financial literacy, told Business Insider Australia in July that they agreed more oversight was needed in the space. .

Tan said she believes stricter regulations will strengthen the integrity of good actors.

“There are a lot of positive people in the space,” she said, and she thinks there is a clear difference between spruikers and those who provide tools for financial literacy.

Nikolic shared this belief, but said she was concerned that the regulations would deter non-professionals from sharing useful general financial and educational content on the platform.

“Where I see the limit is I don’t want young women who are transparent about money to disappear for fear of regulation,” she said.

“ASIC has a very difficult job regulating really egregious faults, on the one hand, and clarifying the regulations. But on the other hand, recognize that it should be a values-based approach. “