Social media is fundamental to life in the 21st century. Platforms like Tik Tok and Instagram are hugely successful and popular forms of entertainment.
But social media is not just used as a source of entertainment, it is also a news source and a means of sharing information or advertising. With the advent of social media comes the rise of influencers, who promote financial and investment products (whether through sponsorships, affiliations or their own research and recommendations). The rise of social media influencers promoting financial products and investments has even coined the term 'finfluencers' (financial influencers).
In 2021 ASIC conducted a survey of young people on money and their financial behaviours, which determined that 28% of people aged 18 - 21 follow at least one 'finfluencer' on social media.1 Of those who follow a 'finfluencer', 64% report that their behaviour has changed as a result of the content produced by a 'finfluencer'.
With the power and reach of social media, it is easy to see why ASIC is concerned with ensuring that the content produced by 'finfluencers' is compliant with the AFSL requirements under the Corporations Act 2001 (Cth) (Act). ASIC made its intentions in this respect clear in a recent media release in March 20222.
While not all conduct by social media influencers will constitute a breach of the licensing requirements under the Act, the distinction between what is permitted and what is not can often be blurry.
What sort of conduct by 'finfluencers' may require an AFSL?
Recommendations on financial products
If a social media influencer conveys a recommendation about a certain financial product or otherwise induces another person to invest in a certain product, that will amount to financial product advice. For example, a social media influencer might say on their platform:
"You should really be investing in the following shares which have great returns and are good for investors looking to get into the market".
Such a statement would amount to an opinion or recommendation which can reasonably be regarded as influencing the decision of a person to invest in the financial product.
A mere statement of fact about the particular product would not amount to financial product advice. For example:
"As a shareholder you hold an interest in the Company and the Company may pay dividends on its shares during the year based on company performance".
Such a statement is merely factual in nature and describes a feature of the particular financial product and is unlikely to amount to financial product advice.
Promoting/dealing with financial products
An influencer who advertises and assists their followers to acquire a financial product through their social media platform may be taken to be 'dealing' with a financial product.
For example, where a social media influencer receives a sponsorship to promote a certain financial product and directs their followers to the product provider via a link, this may be taken to be dealing in a financial product by arranging the investment on behalf of the financial services provider. This is distinct from where the provider merely advertises a trading platform without being involved in the transaction itself, which is conducted by an AFSL holder.
What should I do if I'm a social media influencer who promotes financial products for AFSL licensees
It is important that 'finfluencers' properly consider the nature of any promotion or sponsorship that they accept in respect of AFSL holders and financial services providers. They must ensure that the type of recommendations they are giving do not constitute financial product advice.
While it is acceptable to make factual statements about the characteristics of certain products as part of their content, or to advertise the services of an AFSL licensee (in certain circumstances where such advertisements does not constitute dealing with a financial product), they must ensure that they do not themselves deal with financial products or provide any opinion or recommendation about the financial product, or the quality of the product in a manner which would induce or reasonably be taken to induce an investor to make a decision in respect of that product.
They must also ensure that by sponsoring or promoting a financial services product or a trading platform, they are not themselves engaging in 'dealing' with the product by arranging the transaction.
Social media influencers have significant power by drawing the attention of their followers to whatever they may be promoting. It is evident from ASIC's recent media release, that they have also drawn the attention of ASIC to their activities and ASIC will follow their activities to determine whether they comply with the AFSL requirements under the Act. ASIC will take proactive steps to protect investors and ensure that any financial product advice or dealings in financial products are only conducted by those who hold appropriate AFSL.
Footnotes
1 ASIC, 'Young People and Money - Survey Snapshot', December 2021 available at https://files.moneysmart.gov.au/media/kjvjabp5/young-people-and-money-survey-snapshot.pdf
2 ASIC, '22-054MR ASIC issues information for social media influencers and licensees', 21 March 2022, available at https://asic.gov.au/about-asic/news-centre/find-a-media-release/2022-releases/22-054mr-asic-issues-information-for-social-media-influencers-and-licensees/
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
