Social media has become a popular platform for financial influencers, or “finfluencers,” to share investment advice and tips. However, not all of this advice is sound or trustworthy. Some finfluencers may promote high-risk products or provide misleading information without disclosing conflicts of interest.
Regulators around the world are increasing their scrutiny of finfluencers. In the United States, the Securities and Exchange Commission (SEC) has stepped up monitoring of influencers who promote cryptocurrencies and stocks without transparency. Kim Kardashian was fined $1.26 million in 2022 for promoting a crypto asset without revealing she was paid to do so.
The European Securities and Markets Authority has warned that influencers could be held liable for spreading false or misleading investment information. Countries like France and Spain have put stricter rules in place for finfluencers. The United Kingdom’s Financial Conduct Authority said in 2023 that influencers promoting high-risk investments could face prosecution.
In Macau, the Monetary Authority (AMCM) has not yet issued a public warning about finfluencers, likely because there are not many local ones.
Scrutiny rises for social media influencers
Hong Kong, which has more finfluencer activity, has taken steps to protect investors.
The Securities and Futures Commission (SFC) of Hong Kong launched a “Don’t be Sucker” campaign in December to raise awareness about fraudulent schemes and caution against investment scams, especially online. The campaign also addresses deceptive tips from financial influencers and the need to manage conflicts of interest. The SFC monitors finfluencers to make sure they do not give financial advice without the proper licenses, which is against Hong Kong regulations and can lead to penalties.
The AMCM has advised the public in Macau to get financial services through licensed institutions. “Finfluencers may introduce financial products or services based on their personal interests while not partnering with financial institutions,” the AMCM noted. It promises to keep educating the public and making sure financial institutions do not mislead consumers.
The AMCM requires financial institutions to thoroughly assess investors’ skills to protect their interests. They also must not use untrue or vague methods that could cause misunderstanding when selling financial products. As finfluencers gain more prominence, especially among younger investors, it is crucial for individuals to be cautious about the financial advice they receive on social media.
Seeking guidance from licensed professionals and doing thorough research can help protect against potential risks and ensure more informed investment decisions.
Image Credits: Photo by Tyler Franta on Unsplash
