During the COVID-19 pandemic, a record number of first-time traders flocked to the market, which propelled financial influencers (‘finfluencers’) into ASIC’s spotlight and squarely placed them within ASIC’s enforcement remit.
The rise of finfluencers is unsurprising in the social media and digital age. As financial services and financial product distribution become more challenging and complex in Australia, finfluencers are fast developing a niche by providing more accessible and digestible financial information to Australians. This has also led to a number of financial services licensees and product manufacturers to engage with finfluencers as a valuable distributional channel.
In this context, on 21 March 2022, ASIC issued a new Information Sheet INFO 269 Discussing financial products and services online containing important information for both finfluencers and AFS licensees who engage finfluencers, including examples of what ASIC considers to be financial product advice, dealing by arranging and misleading and deceptive conduct.
In this article, we explore some of the common traps and risks that AFS licensees should be aware of when engaging finfluencers.
When will a finfluencer be providing a financial service?
The INFO Sheet focuses on two primary scenarios where finfluencers may be seen to be providing a financial service:
- dealing by arranging under section 766C of the Corporations Act; and
- financial product advice under section 766B of the Corporations Act.
Given the identity of finfluencers as actors, sportspeople, celebrities and other social media personalities, in our experience, there is often reluctance to appoint such persons as authorised representatives. However, as we will discuss below, the risk of finfluencers transgressing into the provision of financial services is high. Accordingly, by engaging finfluencers who are not licensed or otherwise authorised under an AFSL, the scope of activities that a finfluencer may undertake will be significantly limited.
Of course, there are also a range of disclosure obligations that are likely to be triggered when engaging a finfluencer.
Dealing by arranging
As ASIC recognises, arranging for a person to deal in a financial product, such as buying or selling a financial product, is a financial service – specifically, dealing by arranging under section 766C of the Corporations Act. Whether you are arranging for someone to deal will depend on the extent of your involvement in making the transaction happen. Arranging is likely to occur where the finfluencer is actively involved in making the transaction happen.
The activities of finfluencers can vary in this regard – we see the following common activities:
- providing information about financial products;
- providing a hyperlink to the product issuer’s website; and
- sharing discount codes.
We consider that absent other involvement, the above activities of themselves are unlikely to constitute arranging. However, this is a determination that will need to be made on a case-by-case basis, having regard to the entirety of the relevant transaction and any remuneration/benefits obtained by the finfluencer.
While ASIC provides some brief examples in the INFO Sheet on arranging, more detailed guidance is provided in ASIC Regulatory Guide 36 Licensing: Financial product advice and dealing.
Financial product advice
By their very name, finfluencers are ultimately influencing their viewers with the content they create and share with their followers. In discussing financial products and services, it is prudent that finfluencers ensure that their content does not stray outside of being factual information only or if properly authorised, general advice. Given the identity and large following many finfluencers have, this is a tricky balance to manage.
By way of recap, financial product advice is defined as a:
- recommendation or a statement of opinion or a report of either of those things;
- that is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or
- could reasonably be regarded as having intended to have such an influence.
Whether a finfluencer gives financial product advice is not only a function of the content they disseminate. It is also a function of their popularity and pulling power, and the channels through which they operate.
While disclaimer text can mitigate the risk of financial product advice, it will not, in and of itself, determine whether a communication constitutes financial product advice. As the INFO Sheet notes, it is important that a finfluencer looks at the overall impression and circumstances of their content. Further to the overall impression, ASIC also makes clear that some statements made by finfluencers may not only constitute financial product advice, but may also be misleading and deceptive conduct if the claims cannot be substantiated e.g. that a particular financial product will “generate significant returns.”
In our experience, general advice risk is the greatest area of risk to manage for finfluencers and AFS licensees engaging finfluencers. We traverse some common practical examples in the table below.
In each case, as is the case with arranging, the totality of the circumstances will need to be assessed to determine the general advice/information only position. Our comments below relating to risk must be considered against the backdrop that one of the key reasons, if not the key reason, an influencer is engaged by a sponsor is to leverage off the influencer’s influence. So in a general sense, the influencer is being engaged to, at least impliedly, support the sponsored product or service. However, risk is a different issue because as a practical matter, if the position was that any influencer gives general financial product advice, then the result would be impractical. There must, as a threshold matter, be a statement or opinion expressed. While wearing a branded t-shirt can be intended to influence sales, there must be a recommendation or statement of opinion. Of course, there is no reason why a recommendation or statement of opinion needs to be in a written form. It can also occur through conduct.
Any such conduct must be assessed against the context. This is particularly relevant with social influencers. By way of example, just because a person wears a branded t-shirt in a public forum does not mean that he or she is providing general advice. The specific conduct, context and cadence of the interaction will be key to determining whether general advice is, in fact, being provided. Our comments below, particularly in relation to risk, need to be interpreted in this context.
|Finfluencer activity||General advice risk|
|Finfluencer posts on social media announcing they are an ambassador or promoter for a licensee||Low.
Risk will be low if the message is kept to only factual information and there are no affiliate arrangements. A degree of risk remains because announcing ambassadorship could be perceived as an announcement which is intended to influence customers to consider a financial product, through the indirect inference that if the influencer is a supporter of the brand, he or she is recommending the product or service.
|Finfluencer posts facts about a financial product. ASIC provides the following example:
‘ETFs can track different asset classes or individual assets that may generate a return, but the ETF provider owns the shares or assets on behalf of the fund members.’
Risk will be low if the message is kept to only factual information. The finfluencer should seek to avoid any imbalanced messaging by not implying a recommendation that one financial product is better than another.
|Finfluencer posts their own portfolio holdings, without giving any express recommendation||Low.
Unlikely to be financial product advice if only factual information is displayed (see RG 244).
|Finfluencer wears branded apparel or otherwise highlights the brand of the product or service.||Low to medium.
Low risk where the brand highlight is passive and it is relatively low profile (e.g. just wearing the apparel).
Medium risk where the finfluencer makes a more active reference to highlight the brand (e.g. point it out expressly) or the brand appearance is prominent (e.g. in very large letters/loud colours).
|A licensee’s engagement with a finfluencer is infrequent or on a one-off basis||Medium.
Depends on the scope of the engagement, the finfluencer’s activities and whether the finfluencer is receiving a benefit or payment in exchange for referrals.
|A finfluencer works full-time and earns a salary from providing affiliate links to financial services providers||High.
Looking at the circumstances as a whole, it is likely this would be perceived as carrying on a financial services business, especially where they are receiving a benefit or payment in exchange. However, consideration should be given to the finfluencer’s specific activities.
|Finfluencer provides an opinion about individual financial products they are buying and why their followers should buy them. ASIC provides the example:
‘I’m going to share with you five long-term stocks that will do well and which you should buy and hold’
Intends to influence someone’s decision to buy specific financial products by providing an opinion about these products.
|Finfluencer posts a personal account of their experience with a financial product or licensee. For example:
‘I really like this broker. They are so easy to use, with $0 joining fees and I am making great returns by investing $1000 from my paycheck each month.’
This would be seen to be a clear endorsement of the financial product which may be regarded as a recommendation of the product.
The claims made could also be misleading and deceptive if they can’t be substantiated.
Implications for licensees
AFS licensees who engage finfluencers should be considering the implications of the above, as it could mean that finfluencers are ‘representatives’ of their licence (or perceived to be so), meaning there would be a myriad of triggered obligations on part of the licensee. This brings with it difficulties considering the nature of work of finfluencers, including an unlimited client-base and that they can provide advice/information in the form of private direct message (‘DM’) or in a format with a limited shelf life, such as Instagram ‘stories’ which typically expire after 24 hours.
For example, if a finfluencer is a representative of a licensee and providing financial services, the licensee may be required to ensure that finfluencers:
- meet applicable training standards;
- have acted within the best interests of the client in relation to the advice;
- provide appropriate advice to the client;
- provide advice based on complete and accurate information;
- where promoting financial products subject to the design and distribution obligations, take reasonable steps to distribute the products consistent with the product’s target market; and
- manage and prioritise any potential conflict of interest between them and the client.
Case law including that of RI Advice Group in March 2021 (see our article here) warns us of the potential repercussions of not having sufficient mechanisms in place to monitor compliance of an authorised representative. In that case, not only was the general catch-all obligation to ensure the representative complies with financial services laws breached, but it was found that a failure to monitor a representative may more broadly lead to a breach of the duty to act efficiently, honestly and fairly. As ASIC states in the INFO Sheet, licensees should exercise caution when engaging finfluencers in paid work and endorsements. They should do their due diligence especially if the finfluencer can be seen as their representative and should put in place appropriate risk management, monitoring and compliance processes.
There are, however, exemptions for commentators on various media platforms where general advice is being provided that some finfluencers and licensees could potentially rely on so as to not be caught by the financial product advice provision:
- by publishing a newspaper that is generally available to the public and where the sole purpose of the newspaper is not the provision of financial product advice;
- in transmissions made by means of an information service where the transmissions are generally available to the public where the sole or principal purpose of the transmissions is not the provision of financial product advice; or
- in sound recordings, video recordings or data recordings that are made publicly available and where the sole or principal purpose of the recordings is not the provision of financial product advice.
Such terminology ultimately does not reflect the reality of the current media landscape with the likes of Instagram, TikTok and Twitter, however it could be said that the vast majority of social media content in this space comprises either sound or video recordings of some description.
There are also passing on exemptions available, whereby a person is regarded as not providing financial product advice where they are merely passing on content prepared by another person, such as the AFS licensee.
The HSF team has extensive experience in assisting licensees to understand their licensing obligations, and closely follows and comments on developing law regarding general/personal advice and financial product distribution. Get in touch with one of our experts below.
 Corporations Act s 766B.
 ASIC RG 36 Licensing: Financial Product Advice and Dealing (RG 36.31).
 ASIC v Westpac  FCAFC 187, , , as upheld in Westpac v ASIC  HCA 3.
 Regulatory Guide 146.
 Corporations Act ss 961B and 961L.
 Ibid ss 961G and 961L.
 Ibid ss 961H and 961L.
 Corporations Act s994E(1).
 Ibid ss 961J and 961L.
 Australian Securities and Investments Commission (ASIC) v RI Advice Group Pty Ltd (No 2) (2021) 156 ACSR 371.
 Corporations Act s961L.
 Ibid s 912A(1)(a).
 Corporations Act s911A(2)(ea).
 Corporations Act s911A(2)(eb).
 Corporations Act s911A(2)(ec).
 Corporations Regulations Reg 7.1.31.