Promoting Online Investing? Beware: FCA Targets Finfluencers

May 22

Posting investment recommendations on social media is not without risk (finfluencing), as it can lead to severe consequences impacting both the poster and the audience. The act of giving financial advice is heavily regulated for investor protection reasons. Therefore, it is crucial to exercise caution and due diligence before sharing any financial advice online, as the implications can be significant and far-reaching.

The UK Financial Conduct Authority (FCA) has taken legal action by pressing charges against nine individuals. This legal action is a result of their involvement in an unauthorised foreign exchange trading scheme that was actively promoted on various social media platforms.

The FCA alleges that from May 19, 2018, to April 13, 2021, two lead individuals gave unauthorised advice on trading Contracts for Difference (CFDs) through an Instagram account. They also paid seven other individuals to promote the scheme to their social media followers. The combined following of the Instagram accounts of these individuals was 4.5 million.

CFDs are a high-risk investment product utilised to speculate on the price movements of various assets. Recognising the inherent risks involved, regulatory bodies have issued stern warnings on the usage of this particular financial instrument.

The regulation of CFDs in UK is not new. Before Brexit, on a European level, ESMA had implemented temporary product intervention measures under the Markets in Financial Instruments Regulation (MiFIR) concerning Contracts for Difference (CFDs). Since the EU-level rules were temporary, most European countries implemented these regulations after the expiration date, including the Netherlands where the selling, distributing, and marketing of CFDs are also strictly regulated.

See here for the FCA press release.