Australia’s corporate regulator has once again warned listed companies to take care when dealing with unlicensed ‘finfluencers’, or risk falling foul of legislation designed to protect everyday investors.
On Tuesday, the Australian Securities and Investments Commission (ASIC) commissioner Cathie Armour urged companies to do their due diligence when engaging with financial influencers — a growing category of financial commentators who use their social media platforms to champion investments or dispense advice.
The number of finfluencers in Australia has exploded over the past 18 months, in tandem with the rise in new retail traders and the uptake of cryptocurrencies.
While seeking broad insight from online commentators can be a solid starting point for many investors, Armour warned that many finfluencers go without an Australian Financial Services license.
That means many finfluencers are technically unable to administer specific financial advice, unlike licensed financial advisers or financial counsellors.
If a finfluencer is found to be running a financial services business without the necessary education and paperwork, they could be liable for penalties under the Corporations Act.
Armour said that also applies to listed companies who may engage their services to spruik their investment products online.
“If you enter into an arrangement with someone who is carrying on an unlicensed financial services business, you may be breaching the Act,” she said.
“You may also want to understand whether the finfluencer has existing vested interests to promote other financial products and services in case there’s a conflict of interest or risks to your organisation.”
The statement is just the latest effort by corporate regulators to safeguard the growing industry.
In its most recent statement, ASIC said its review of “select finfluencers”, announced in September, is ongoing.
As meme stocks continue to dominate the investment portfolios of many Australians dazzled by the promise of quick gains, some trading platforms have started to offer their own educational materials.
Citing internal research which found one in five young investors now turn to TikTok for financial advice, Superhero founder John Winters last week said: “It’s up to all of us, if we’re in this space, to be leading the way on financial literacy.”
Beyond the risk faced by companies which team up with rogue finfluencers, ASIC said it continues to monitor for prevalence of social media pump-and-dump schemes.
The regulator said conversations with social media platforms and forum moderators are ongoing, with ASIC reminding operators of their responsibilities under the Corporations Act.
Companies experiencing major and otherwise unexpected fluctuations in share price should pay attention, the regulator added.
“ASIC monitors the market for this activity and will act when it sees extreme price movement,” Armour said.
“However, it is important for companies to be aware of these types of misconduct-related risks and their potential for unintended consequences arising from finfluencer collaboration.”