The Financial Conduct Authority (FCA) has revamped its social media guidelines in a bid to tackle harmful online financial promotions.
The new guidance, which is subject to an eight-week consultation period, will reflect how social media is currently used to promote financial products online, the regulator said.
In recent times, the FCA has ramped up its scrutiny of online financial promotions and in particular the role of financial influencers or ‘finfluencers’.
Younger consumers are likely to trust the information provided to them by influencers on social media, the regulator said. However, promoting a regulated financial product without FCA approval can be a criminal offence.
Lucy Castledine, FCA consumer investments director, said: “We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm.
“We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online. And for those touting products illegally, we will be taking action against you.”
The FCA has also partnered with the Advertising Standards Authority to help educate consumers and influencers about the risks involved in promoting financial products.
Interactive Investor senior personal finance analyst Myron Jobson welcomed the consultation, labelling the rise of ‘finfluencers’ a “headache” for the FCA.
He added: “The credentials of many so-called finfluencers are weak at best – if they exist at all. But there are also a number of well-versed and highly qualified financial professionals on social media offering solid guidance.
“Meanwhile, it is difficult to use the internet without encountering something that looks like a scam advert. And there are also malicious ads that aren’t easily discernible, which makes surfing the web a minefield.
“The difficulty for the uninitiated is sifting the wheat from the chaff. The concern is those who experienced a baptism of fire by losing money by making risky investments after seeing a misleading or scam ad could be put off investing for life and scupper financial goals.”
Rosie Hooper, chartered financial adviser at Quilter, said: “With its new consultation on financial promotions, the regulator is making it harder for promotions to be approved and is cracking down on harm occurring from unauthorised influencers communicating illegal financial promotions via social media.
“This is long overdue given the spate of social media posts over a number of years that have lured people into high-risk schemes that don’t state the real risks of falling victim to scams on social media which have skyrocketed over recent years.
“This crackdown is particularly needed during the cost-of-living crisis as people are more likely to turn to alternative sources with the promise of high returns being tempting for cash-strapped individuals without their eyes open to risks involved.”
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