As influencers help fuel online get-rich-quick frenzy, FCA warns…
- Watchdog has sounded the alarm over investments promoted by internet celebrities
- The FCA said 8,582 misleading promotions were blocked or changed last year
- Regulator issued over 1,800 alerts to prevent savers losing money to scams
High profile: Reality TV star Kim Kardashian has been fined £1million by US regulators
The city’s watchdog has sounded the alarm over the safety of “get-rich-quick” savings and investments promoted by internet celebrities.
The Financial Conduct Authority (FCA) said a record 8,582 misleading promotions were blocked or altered last year, 14 times more than in 2021.
The regulator has also issued more than 1,800 alerts to prevent savers from losing money to scams, which have exploded since the pandemic.
The interventions came amid growing concern over the number of social media personalities posting questionable adverts for financial products.
There are concerns that these financial influencers – dubbed “fin-fluencers” by the FCA – could convince people to invest money in unsuitable or high-risk products. “End-fluencers are a growing concern for the regulator,” the FCA warned.
The watchdog said companies such as Facebook and Instagram owner Meta and YouTube parent Alphabet will now be held to higher standards to prevent such illegal ads. The move comes as a series of high-profile cases show growing fears over the involvement of social media personalities in finance. Reality star Kim Kardashian found herself in hot water last year after failing to reveal she had been paid over £200,000 by crypto firm EthereumMax to post an Instagram post on her untested EMAX crypto tokens.
Kardashian, who has 344 million followers on Instagram and nearly 75 million on Twitter, has been fined £1million by US regulators.
Regulators have warned the public to think twice before taking investment advice from celebrities and influencers.
Action movie star Steven Seagal and boxer Floyd Mayweather Jr have also been fined in recent years for flouting rules on crypto promotions.
Former Premier League footballer Michael Owen also came under fire last year for promoting a new crypto investment, saying it couldn’t lose value.
The former Liverpool and Real Madrid striker later deleted the tweet after discussions with the British advertising watchdog. FCA chief Charles Randell previously said influencers were guilty of fueling “get-rich-quick delusions” and echoed concerns about unregulated and risky investments.
Myron Jobson, senior personal finance analyst at Interactive Investor, said the rise of so-called fin-fluencers is a “headache” for regulators.
He said: “The fear is that the FCA has only caused a stir in its efforts to reverse the trend of misleading advertisements and financial scams.”
Jobson also discussed how social media is an “untameable beast” in the context of misleading advertisements. Damian Green, Conservative MP and Acting Chairman of the House of Commons Digital, Culture, Media and Sport Committee, welcomed the watchdog’s latest move to stamp out misleading financial adverts.
“It’s a new and wide open area for scammers who exploit the desire to get rich quick,” he said.
Green also warned that the biggest challenge for regulators would be staying ahead of the game, especially when more fraudsters are abusing vulnerabilities brought about by the cost of living crisis.
Sarah Pritchard, Executive Director of Markets at the FCA, said: “As households continue to be affected by the rising cost of living, the FCA is concerned that people struggling with their finances may be more susceptible to scammers or to high-risk advertisements, unregulated products.
She added that the FCA would continue to pressure social media companies to stop allowing illegal promotions that “put people’s hard-earned money at risk”.