The FCA cracks down on "finfluencers"

The Financial Conduct Authority has today issued a press release announcing that it is "crack[ing] down on illegal finfluencers", a term used to describe social media "influencers" who use their platforms to advertise or promote financial services products.

The brief press release details that twenty such "finfluencers" are to be voluntarily interviewed under caution as the FCA "launches targeted action against finfluencers who may be touting financial services products illegally".  The release refers to statistics to the effect that "nearly two-thirds (62%) of 18 to 29-year olds follow social media influencers" and that "74% of those said they trusted [influencers'] advice and 9 in 10 young followers have been encouraged to change their financial behaviour".  Based on those (unattributed) data, the release asserts that "increasing numbers of young people are falling victim to scams, and finfluencers can often play a part".

The key to understanding the FCA's "targeted action" may lie in the observations of Steve Smart, joint executive director of enforcement and market oversight at the FCA, quoted in the release:  "Finfluencers need to check the products they promote to ensure they are not breaking the law and putting their followers' livelihoods and life savings at risk".

Today's announcement is not the FCA's first in this area.

On 16 May 2024 the FCA announced that it was charging nine individuals in relation to an unauthorised foreign exchange trading scheme promoted on social media; eight of those nine were social media influencers.  All nine subsequently appeared at Southwark Crown Court and their trials are due to take place in January and March 2027.

It is clear from both announcements that the FCA is committed to bringing its prosecutorial weight to bear in the social media space.

The section 23 Financial Services & Markets Act 2000 offence, which the FCA has charged in the cases of the May 2024 defendants, appears (at first blush) to fit the conduct that it wishes to target, the suggestion being that the promotion of financial products on social media channels amounts to “carrying out a regulated activity without authorisation”.

However, the offence is highly technical and naturally provokes legal arguments which any charged individual will need advice and representation upon.

Furthermore, it is legitimate to ask whether section 23 was intended to, and does in fact, criminalise the targeted conduct.  It might be argued that the offence was drawn up in a period long before the rise of "finfluencers" and its language lends itself much more clearly to promotions which are overtly of a financial nature than to what might be said to be celebrity endorsements or recommendations.

More broadly, the question also arises whether criminal prosecution is the appropriate enforcement response to the phenomenon of social media promotion, as opposed to the civil law interventions available to the FCA such as censure, injunctions and / or financial penalties.  It might be argued that the FCA’s real intention is to send a loud message to social media influencers that it is “watching” what they are doing, and that if that message is heard, the FCA has already achieved its objective, whether or not any convictions follow.

Only time will tell if the FCA is right.