FCA urges investment firms to seek legal advice before using influencers

The Financial Conduct Authority has warned investment firms against using influencers to promote their products on social media, after seeing a surge in regulatory action on promotions by licensed firms.

In an alert issued by the regulator yesterday (3 February), the FCA said the use of social media influencers had become a concern and that companies should seek legal advice before promoting their products in this way.

This was after modifying or removing 564 promotions in 2021, a 172% increase from 207 announcements the previous year. Over the two years, approximately 130 accredited companies were involved.

The city watchdog said: “Retail investments’ use of social media influencers on various platforms to market investments is becoming a concern for us.

“Companies should ensure they have taken proper legal advice to understand their responsibilities before using influencers.”

Retail investment and personal lending were the sectors with the highest number of FCA interventions, accounting for 77% of the total.

Next come retail banking (11%), pensions and retirement income (6%), general insurance and provident insurance (4%) and asset management (1%).

FCA data also showed it issued 1,410 alerts about unauthorized businesses and individuals in 2021, an 18% increase from 2020.

A third (30%) of the warnings issued were about cloning scams.

It also reported a 10% increase in reports received last year of illegal financial promotions by unauthorized individuals and said it had reviewed 1,686 promotions, of which only a minority (5%) came from its own monitoring.

Almost half (46%) were from consumers, a quarter from different areas of the FCA, 16% from UK regulators and 6% from businesses.

But the FCA said it has seen a significant reduction in non-compliant ads paid for by unauthorized entities on Google since the implementation of a new advertising policy for financial services.

In November, Google offered the FCA $3m (£2.19m) in advertising credits to help tackle online scams and pledged an additional $2m (£1.46m) ) credits to support industry scam awareness campaigns.

The following month, social media giants Twitter, Meta (formerly Facebook) and Microsoft all pledged to introduce a revised advertising onboarding process, which will require UK-regulated financial services advertisers to be authorized by the FCA. .

Despite the reduction in non-compliant ads, the FCA said it plans to continue its engagement with other social media platforms and carefully monitor the online market to update its warning list as appropriate.

The FCA said it could also ask companies to determine whether customers may have acted on non-compliant promotions and take appropriate action to reduce any harm consumers may have suffered as a result.

Risky investments

Last month, the FCA presented proposals for a number of measures aimed at addressing concerns about how easily and quickly people can make high-risk investments.

The regulator said it was preparing for “significant tightening of its rules” on how high-risk financial products are marketed to prevent consumers from accessing investments they don’t understand.