The Australian Securities and Investments Commission (ASIC) has issued warning notices to 18 social media ‘finfluencers’ suspected of unlawfully promoting high-risk financial products and providing unlicensed financial advice to Australians as part of a Global Week of Action Against Unlawful Finfluencers by nine international market regulators.

Last week, ASIC and regulators from the United Kingdom, United Arab Emirates, Italy, Hong Kong and Canada took coordinated actions to crack down on unauthorised finfluencers.

Together, the nine regulators used a combination of regulatory and enforcement powers including arrests, warning notices, website takedowns, educational schemes with authorised finfluencers and consumer awareness programs to put unauthorised finfluencers on notice and warn consumers of the risks of unauthorised and misleading finfluencer content.

ASIC’s current concerns lie with finfluencers positioning themselves as so-called trading experts, who are providing unauthorised financial product advice and promoting high-risk, complex investment products that can cause real consumer harm, such as contracts for difference (CFDs) and over the counter (OTC) derivative products.

Their social media content is often accompanied by misleading or deceptive representations about the prospects of success from the products or trading strategies they promote, sharing images of lavish lifestyles, sportscars and other luxury goods.

If a finfluencer is not licensed, an authorised representative or exempt, they are legally not permitted to carry on a business of providing investment advice in Australia.

Investors and consumers can check the credentials of finfluencers out by using ASIC’s professional registers search tool.

Recent Moneysmart research found that 41% of young Australians seek financial information or advice from online sources such as social media, including finfluencers.

The licensing provisions under the Corporations Act 2001 (the Act) apply to persons who carry on a financial services business in Australia. This includes persons who provide financial product advice or arrange for a person to deal in a financial product. Carrying on an unlicensed financial services business in Australia is an offence under the Act, unless authorised as a representative of a licensee or relying on an exemption.

The Act imposes significant penalties, including up to five years’ imprisonment for an individual and financial penalties into the millions of dollars for a corporation.

The law also prohibits conduct that is misleading or deceptive, or is likely to mislead or deceive, in relation to financial products or services. A finfluencer does not need to be licensed to breach the misleading or deceptive prohibitions.

In December 2022, the Federal Court found social media finfluencer Tyson Robert Scholz contravened s911A of the Corporations Act by carrying on a financial service business (between March 2020 and November 2021) without an Australian financial services licence.