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Finfluencers promote financial products and share insights and advice with their followers on social media. This can be problematic when they are not authorised and don't give adequate information about the risks of the products concerned. In the UK, the FCA and ASA have been cracking down on finfluencers.
Now, the European Parliament has struck an informal deal with the Council on new rules to help retail clients invest in quality financial products and protect them from misleading or biased information.
They have agreed on a series of changes to several EU directives with the overall aim of reinforcing investor protection rules, addressing retail customers' participation in capital markets, and reducing dependence on bank loans, especially for smaller companies.
The particularly interesting points relate to financial literacy and finfluencers. EU countries will have to promote measures that support the financial literacy and financial education of customers on the responsible purchase of investment and insurance products. Where appropriate, these measures should address the needs of specific age groups and other target groups.
As younger clients are likely to be more vulnerable to mis-selling online amplified by influencers or social media, MEPs asked for those activities to be supervised. Where investment firms use the services of finfluencers to promote financial products or contracts, firms should have a written agreement with them, their contact details and control over their activities.
The legal texts will be finalised early this year. After that, member states will have to transpose the new rules within 24 months following their publication in the EU's Official Journal.
In the UK, the FCA has published guidance on financial promotions on social media to clarify its expectations for when firms and influencers use social media to communicate financial promotions, and to address emerging consumer harm that the FCA has seen arising from use of social media. They've also worked with the ASA on guidance. In addition, both the ASA and CMA have published more general guidance for influencers and for the brands which use them. It is important that brands make sure that their social media ambassadors know the rules and the consequences of not complying with them.
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