The Financial Conduct Authority has warned investment firms on the use of influencers to promote their products on social media, after seeing a sharp uptick in regulatory action on promotions by authorised firms.
In an alert published by the regulator yesterday (February 3) the FCA said the use of social media influencers had become a concern and firms should get legal advice before promoting their products in this way.
This was after it had amended or withdrawn 564 promotions in 2021, an uptick of 172 per cent on the 207 ads the previous year. In both years about 130 authorised firms 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.
"Firms should ensure they have taken appropriate legal advice to understand their responsibilities prior to using influencers.”
Retail investments and retail lending were the sectors with the highest number of FCA interventions, amounting to 77 per cent of the total.
This was followed by retail banking (11 per cent), pensions and retirement income (6 per cent), general insurance and protection (4 per cent) and asset management (1 per cent).
The data from the FCA also showed it had issued 1,410 alerts about unauthorised firms and individuals in 2021, an increase of 18 per cent on 2020.
A third (30 per cent) of the warnings issued concerned clone scams.
It also reported a 10 per cent increase in reports received about illegal financial promotions by unauthorised persons last year and said it had reviewed 1,686 promotions, of which only a minority (5 per cent) came through its own monitoring.
Almost half (46 per cent) came from consumers, a quarter from different areas of the FCA, 16 per cent from UK regulators and 6 per cent from firms.
But the FCA said it had seen a significant reduction in non-compliant paid for advertisements by unauthorised entities on Google since its implementation of a new financial services ad policy.
In November, Google offered the FCA $3m (£2.19m) worth of ad credits to help fight online scams and pledged a further $2m (£1.46m) in credits to support industry scam awareness campaigns.
The following month, social media giants Twitter, Meta (previously Facebook), and Microsoft, all committed to introducing a revised advertising onboarding process, which will require UK regulated financial services advertisers to be authorised by the FCA.
Despite the reduction non-compliant ads, the FCA said it plans to continue engagement with other social media platforms and monitor the online market carefully to update its warning list as appropriate.
The FCA said it may also ask firms to consider whether any customers may have acted on the non-compliant promotions and to take appropriate action to reduce any harm which consumers may have suffered as a result.
Risky investments
The regulator said it was preparing for “a significant strengthening of its rules” on how high-risk financial products are marketed to prevent consumers from accessing investments they do not understand.
This followed a discussion paper in April, where it first floated ideas around forcing people to take an online test before they can invest in high risk assets, as part of its consumer investments strategy.
sonia.rach@ft.com
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