U.K. regulator flames firm’s finfluencer efforts

Amid growing concerns about the role of social media in driving financial decisions, the U.K.’s Financial Conduct Authority (FCA) has taken action against a financial firm over its involvement with a “finfluencer.”

The FCA issued a supervisory notice against investment firm Freetrade Ltd., ordering that it remove all paid influencer ads and posts across all social media platforms, including Instagram, TikTok, Facebook and YouTube.

In a notice, the FCA said it concluded that the firm breached conduct rules “by failing to consider the extent to which vulnerable customers might access a financial promotion […] to be made by a social media influencer, in order to promote its services of commission-free investments.”

The regulator indicated it was concerned about promotions involving an “influencer” with over 64,000 followers on TikTok that included information about how she is paying off £38,000 in debt, and did pay off £14,000 in 18 weeks.

“This influencer also has widespread media interest reporting on her story of ‘clearing her debt.'” it said. “The [FCA] therefore considers that her profile is one which vulnerable or indebted consumers could be particularly attracted to.”

The regulator said the influencer’s financial promo video, “viewed in the context of her profile, may lead viewers to believe that if they invest with the firm they will clear their debt, encouraging them to invest.”

However, the regulator said it “considers this to be misleading as there are no guarantees of positive returns on any investment, which may further exacerbate the financial position of those already in debt.”

The FCA also said that, though the video included a risk warning, it concluded “the risk disclosure to be insufficient, the promotion misleading and the influencer’s financial promotion to therefore be in breach of [conduct rules].”

The FCA also reported that it discovered “a TikTok video which was posted to an Instagram story on the influencer’s profile, that promotes the benefits of using the firm to engage in investment business but does not include the required risk disclosure.”

In that instance the regulator said, “FreeTrade did not have appropriate oversight of the influencer’s financial promotion, which would have allowed the firm to identify and request the removal of the TikTok video.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.