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- The news comes after Kim Kardashian was fined $1.26 million in the US
The Financial Conduct Authority has warned that social media influencers could be breaking the law if they promote unregulated financial products.
Kim Kardashian was fined $1.26 million in the US for promoting Ethereum Max without disclosing to her followers that it was a paid promotion.
Shortly afterwards, the FCA warned that it may have been the financial promotion with the largest audience reach in history, due to the size of Karshian’s huge social media following.
Britain’s financial regulator said on Tuesday that influencers could commit a crime if they “promote financial products or services subject to regulation without the approval of an FCA authorized person.”
The penalty could include “up to two years’ imprisonment, the imposition of an unlimited fine, or both,” the FCA warned.
The penalty may include ‘up to 2 years’ imprisonment, the imposition of an unlimited fine, or both’
The FCA also said that ‘firms working with affiliate marketers, such as influencers, must take proactive responsibility for the way their affiliates communicate financial promotions’.
It added that it wants companies to “ensure that promotions provide a balanced view of the benefits and risks, and clearly communicate information that will help consumers make effective, well-informed decisions.”
The report also advises influencers that they should ‘consider whether they are the right person to promote a product or service’.
The FCA said: ‘Social media is an increasingly important part of companies’ marketing strategies, allowing them to reach large audiences with greater speed and frequency.
‘However, poor quality financial promotions on social media can lead to significant consumer harm due to their wide reach and the complex nature of many financial products and services.’
The resurgence of crypto is leading to regulatory scrutiny
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: ‘The FCA has been equipped with new powers to offer consumers extra protection amid the lure of risky investments and the crypto Wild West, and now has influencers in its crosshairs. .
Do you guys love crypto? Kim Kardashian was fined by the American regulator for this promotion on her Instagram account.
‘Regulators are clearly shocked by the damage that superstars can do to the bank balances of vulnerable consumers, who are affected by virtually every move they make.
‘The watchdog is concerned that too many financially vulnerable people are being lured into ‘get-rich-quick’ schemes, with 14 percent taking on debt during the pandemic to speculate in crypto assets. ‘
Laura Suter, director of personal finance at AJ Bell, also noted that in recent years there has been a “surge in paid promotions for financial products, particularly cryptocurrencies.”
Bitcoin, the world’s largest cryptocurrency, has gained significant ground since falling to a low of $16,000 in the wake of the 2022 FTX collapse.
In 2023, it languished between $20,000 and $30,000 for much of the year before reaching $43,000 in December 2023, ahead of US regulator approval of bitcoin spot ETFs.
Earlier this month, the digital currency reached a record high of $73,803, with gains of more than 70 percent this year alone.
The rapid rise in Bitcoin’s price in 2024 has led to a rally of smaller, much more speculative cryptocurrencies.
Since October 2023, companies wishing to promote crypto assets in the UK must be authorized or registered by the FCA, or have their marketing approved by an authorized company.
Suter added: ‘One in six investors used social media to research investments, find new opportunities or get updates on existing investments – but this rose to half of all investors aged 18 to 24, according to the FCA’s Financial Lives survey.
“There is a real danger that financial social media will become a Wild West, rather than a place to get accurate, clear information about financial planning.”
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