'FCA's charge against finfluencers could be first of many'

From Radio 4’s Money Box to the podcasts dropped by the Financial Times, a lot of effort is devoted to making it clear that the content was produced for information and discussion purposes only and that it is not individual financial advice. 

Nine public figures with significant numbers of Instagram followers now know why such disclaimers matter. These so-called 'finfluencers' will appear at the Westminster Magistrates’ Court next month, and all face prosecution for an offence contrary to s21 of the Financial Services and Markets Act 2000.

This makes it a crime in certain circumstances for someone, in the course of business, to communicate an invitation or inducement to engage in investment activity.

The offence does not apply to someone who is authorised to give financial advice by the Financial Conduct Authority, such as an IFA, or to content that has been approved by such a person.

The point of the offence is to protect the public from relying on recommendations from individuals who are unregulated, unqualified and unaccountable.

Those with significant social media followings are in the business of monetising their public profile by making recommendations. When that relates to restaurants, hotels and beauty products, there is no issue; investments are regulated and therefore in a different category.

Of the nine charged by the FCA, Emmanuel Nwanze and Holly Thompson are alleged to have used an Instagram account from 2018 to 2021 to provide advice on buying and selling contracts for difference related to foreign exchange – essentially high-risk bets on price movements over short periods.

The FCA’s decision to prosecute is significant for what it means more generally.

The other seven are alleged to have been issuing unauthorised communications of financial promotions. The regulator also alleged that Nwanze paid TV personalities Biggs Chris, Jamie Clayton, Lauren Goodger, Rebecca Gormley, Yazmin Oukhellou, Scott Timlin and Eva Zapico to promote the instagram account to their followers.

This prosecution may well have been timed to draw attention to the FCA’s guidance on financial promotions on social media; this was updated and republished in March 2024 (FG24/1).

This guidance, which has a specific section aimed at influencers, observes that harm has been caused by using social media to communicate financial promotions.

All segments of the influencer market are capable of communicating a financial promotion, and whether a communication falls within the scope of s21 is not based on the size of an influencer’s following.

The guidance also refers to the remit of the Advertising Standards Authority, which can refer cases to local authorities’ trading standards departments who conduct prosecutions. This is another area of potential risk for those using Instagram and other platforms to recommend financial products.

Some or all of the nine charged by the FCA may have a defence and the prosecution may not succeed, but beyond their individual fortunes, the FCA’s decision to prosecute is significant for what it means more generally.

Warnings, advice and guidance have been issued previously, and the unauthorised promotion of financial products on social media has continued and continued to cause financial harm.

This may be the first prosecution of the high-profile for this offence, but for as long as the practice continues, it is likely to be the first of many.

David Claxton is a barrister at Red Lion Chambers