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As influencers help fuel ‘get-rich-quick’ online frenzy, FCA warns…
- Watchdog sounded the alarm about investments promoted by internet celebrities
- FCA said it blocked or changed a record 8,582 misleading promotions last year
- The regulator has published more than 1,800 warnings to prevent savers from losing money to scams
High-profile: reality star Kim Kardashian was fined £1 million by US regulators
The city’s watchdog has sounded the alarm about 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 modified last year – 14 times more than in 2021.
The regulator also issued more than 1,800 warnings to prevent savers from losing money to scams, which have boomed since the pandemic.
The interventions stemmed from a growing concern about the number of social media personalities posting untrustworthy advertisements for financial products.
It is feared that these financial influencers – called “fin-fluencers” by the FCA – are persuading people to put money into products that are unsuitable or very risky. “Fin-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 company Alphabet will now be held to higher standards to prevent these illegal ads. The move comes as a series of high-profile cases that demonstrate mounting fears over social media personalities’ involvement in finance. Reality star Kim Kardashian landed in hot water last year after she failed to reveal that she was paid more than £200,000 by crypto firm EthereumMax to publish an Instagram post about its untested crypto EMAX tokens.
Kardashian, who has 344 million followers on Instagram and nearly 75 million on Twitter, was fined £1 million by US regulators.
The regulators 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 about crypto actions.
Former Premier League footballer Michael Owen also came under fire last year for promoting a new crypto investment, claiming it could not fall in value.
The ex-Liverpool and Real Madrid striker later deleted the tweet after consulting with the British advertising watchdog. FCA chief Charles Randell previously said influencers were guilty of fueling “delusions of quick riches” and reiterated his concerns about unregulated and risky investments.
Myron Jobson, a 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 made a giant leap in its efforts to stem the tide of misleading advertising and financial scams.”
Jobson also explained how social media is a “difficult beast to tame” in the context of deceptive advertising. Damian Green, Conservative MP and acting chair of the Commons Digital, Culture, Media and Sport Committee, praised the watchdog’s latest move to stamp out misleading financial advertising.
“It’s an area that’s new and wide open to scammers who capitalize on 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 as more and more fraudsters exploit cost-of-living vulnerabilities.
Sarah Pritchard, executive director of markets at the FCA, said: ‘While households continue to be hit by the rising cost of living, the FCA is concerned that people struggling with their finances may be more susceptible to scammers or high-risk advertisements, unregulated products.’
She added that the FCA would continue to pressure social media companies to stop allowing illegal promotions that “endanger people’s hard-earned money.”