The Australian Securities and Investments Commission (ASIC) said it is undertaking a review of “selected” finance influencers on TikTok and other social media platforms amid a boom in financial content online.
It follows statements made by the corporate watchdog in June that flagged the activities of finance influencers as an “area of concern”.
The watchdog is also considering updating its regulatory guide on internet discussion sites to clarify rules of engagement for “finfluencers” on social media.
ASIC confirmed it was reviewing the activities of some “finfluencers” in answer to a question asked at recent hearing on the oversight of ASIC, which queried whether the regulator was undertaking an overview of TikTok financial influencers or undertaking compliance action.
“We are currently undertaking a review of selected financial influencers (‘finfluencers’) to understand their business models and how the financial services law applies to this activity,” ASIC responded.
“Our selection of finfluencers is not targeted specifically at TikTok, although it is being included in the review as we note that some of the finfluencers have a presence on TikTok.”
Social media platforms and discussion forums are increasingly being used by influencers to create a range of finance content, from generalised advice around saving, to spruiking crypto tokens.
Closed apps like messaging platform Telegram are also being used to promote pump and dump schemes 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 be providing advice and are getting paid by other financial product providers to promote their products,” and reiterated that most do not hold an Australian Financial Services Licence that requires them to act honestly and fairly, and have capital buffers set aside in case of investor loss.
“We are concerned that inexperienced investors may be increasingly acting on financial advice from unlicensed providers,” ASIC said.
“This may result in conflicted or poor advice being provided to users who may suffer financial loss.”
Scrutiny of ‘finfluencers’ sharpens
The statements come amid a surge of new entrants into traditional and crypto markets, which have left regulators on the back foot in trying to enforce rules on financial influencers built without them in mind.
Data from Finder shows that around 2.5 million Australians overall started investing for the first time during the pandemic, with many turning to cryptocurrency.
According to the Australian Stock Exchange’s 2020 Investor Study, the past two years have seen an influx of younger investors to the market, with a quarter of recent new investors aged between 18 and 24.
In June, ASIC chairman Joe Longo said “social media influencers giving financial advice” was a “big subject” and an “area of big 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 gaps in regulation of financial advice by individuals on social media.
In June, a TikTok influencer was called out for using his platform to promote crypto token, Hushcoin, to his followers across 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 exposed creators with large followings on platforms like YouTube engaging in ‘pump and dump’ schemes.
Most recently, an ASX-listed penny stock surged 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 social platforms around investing and financial literacy, told Business Insider Australia in July they agreed greater oversight was required in the space.
Tan said she believed greater regulation would enhance the integrity of good actors.
“There are many positive people in the space,” she said, and she feels there’s a clear difference between spruikers and those providing tools for financial literacy.
Nikolic shared this belief, but said she was concerned regulation could dissuade non-professionals from sharing helpful generalised and educational finance content on the platform.
“Where I see the line is I don’t want young women who are being transparent about money to disappear out of fear of regulation,” she said.
“ASIC has a really tough job in regulating the really egregious misconduct, on the one hand, and clarifying the regulation. But then on the other hand, recognising that it should be a values based approach.”