Noting that while finfluencer collaboration may seem like a “fast, effective way” to promote issued securities to the next generation of retail investors, ASIC commissioner Cathie Armour cautioned of regulatory risks in a recent paper.
“If you’re approached by a finfluencer seeking to collaborate, or you’re considering reaching out to one, make sure you do your due diligence as they may be contributing to your regulatory risks,” Ms Armour said.
Social media influencers spruiking stock tips and crypto assets have garnered increasing attention among young retail investors, with the government confirming earlier this year it will not be stepping in to police this online advice environment.
But in this most recent paper, the corporate regulator appeared to be putting the onus on corporations engaging these so-called finfluencers, many of whom may be in breach of the Corporations Act 2001.
“If a corporation engages a finfluencer who breaches the law by providing unlicensed financial advice, the corporation may also be in breach under section 79 of the Act.”
Ms Armour also pointed to an increase in attempted market misconduct, such as “pump and dump” schemes, where promoters buy shares in a company and then start an organised program of increasing, or “pumping”, the share price.
“They may do this via finfluencers, social media or online forums to generate a sense of excitement. As more people buy in, its value rises and other traders latch on, further boosting the price. The promoter then sells – “dumps” – its stake in the now-overvalued security, causing its value to collapse,” Ms Armour said.
“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,” she cautioned.
Ms Armour confirmed ASIC is engaging with social media platforms and their moderators, as well as with finfluencers, about their responsibilities and the limits of acceptable promotion.
“We are also undertaking a review of selected finfluencers to understand their business models and how the financial services law applies to this activity.”
