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Finfluencers are reshaping how financial products are marketed, but working with them can expose businesses to risk. We’ll show you how unauthorised promotions can lead to regulatory penalties – and show you how to protect your business from fines and reputational damage.

Before you team up with a finfluencer, read this. Your business’ future could depend on it.

<p>Over the past decade, the so-called ‘creator economy’ has boomed. Driven by changes in consumer behaviour during the Covid-19 pandemic and by the use of social media platforms like TikTok, Instagram, Twitch and YouTube, it has grown into a multi-billion dollar industry – in 2023, Goldman Sachs Research predicted the <a href="https://www.goldmansachs.com/insights/articles/the-creator-economy-could-approach-half-a-trillion-dollars-by-2027" target="_blank" rel="noopener">creator economy could grow to half a trillion dollars by 2027</a>.</p>
<p>As a result, more people have turned to ‘finfluencers’ (i.e. financial influencers) for financial advice on stocks, derivatives, cryptocurrencies and savings strategies – and this is during a cost-of-living crisis, with skyrocketing inflation and <a href="https://www.bbc.co.uk/worklife/article/20221013-why-gen-z-are-right-to-be-worried-about-money" target="_blank" rel="noopener">numerous reports of the existential financial crisis facing younger generations</a>. Not surprisingly, this has raised alarm bells with the <a href="https://www.fca.org.uk/" target="_blank" rel="noopener">Financial Conduct Authority</a> (FCA) in the United Kingdom and with other regulatory authorities around the world, including the <a href="https://www.sec.gov/files/finfluencers-cfa-institute-0624.pdf" target="_blank" rel="noopener">Securities and Exchange Commission</a> (SEC) in the United States. As their influence grows, so does their ability to shape consumer and investor behaviour.</p>
<p>According to <a href="https://home.barclays/insights/2024/10/finfluencers-the-rise-and-risks-of-investment-content-creators/#:~:text=The%20risk,and%20Investments%20Director%20at%20Barclays." target="_blank" rel="noopener">research commissioned by Barclays</a>, almost half of UK adults do not carry out checks to verify the reliability of finfluencers and their content. Given that four in 10 young people turn to social media for financial support and 52% of investment scams are carried out via social media, it’s not surprising that finfluencers have been turning regulators’ heads.</p>
<p>It’s vital that businesses are alert to the dangers associated with finfluencers and other means of financial promotion. While there may be some advantages from working with finfluencers, it also introduces significant risks. Companies must navigate legal, compliance and reputational challenges to avoid severe consequences. This article explores these risks and challenges, and examines how the FCA is working to crack down on unauthorised financial promotions.</p>
<h2>What is a finfluencer?</h2>
<p>A finfluencer is an individual who uses social media and other digital platforms to create, post and share content that communicates financial promotions regarding subjects such as stocks and shares, cryptocurrencies, savings, derivatives and personal finance management.</p>
<p>Finfluencers usually offer advice in formats that are quick and easy to understand, which is often what makes their content attractive to the average user, but this format can obscure finer details and may not provide enough information to allow their audience to make fully informed decisions.</p>
<p>There is nothing inherently wrong with content creators helping to break down complex financial topics or providing tips on personal finance and budgeting – and there are trusted online resources such as Martin Lewis’s <a href="https://www.moneysavingexpert.com/" target="_blank" rel="noopener">Money Saving Expert</a> that provide this. But these resources don’t offer quick, alluring fixes for financial problems that may run deeper than simply trying to find the best mortgage rates of fixed-term ISAs.</p>
<p>Increasingly, finfluencers are targeting young people and people affected by the cost-of-living crisis by making enticing promises of financial gain that they cannot keep. These individuals often promote get-rich-quick schemes through crypto and other high-risk investments, or paid-for courses and memberships for sponsored content and advice they’re not qualified to give out.</p>
<p>Increasingly, finfluencers are often used as a form of advertising for businesses. In exchange for greater exposure, businesses can pay finfluencers to promote their products – often financial products – on social media sites, forums and messaging channels. This might take the form of a TikTok explainer about saving for a mortgage that links to a lender or financial adviser, or an Instagram post highlighting a crypto platform or investment brokerage.</p>
<p>Brands may also use finfluencers as ambassadors or in marketing campaigns, providing them access to the finfluencer’s following, or as an early-stage data collection point, with the added benefit of pre-selecting engaged or curious consumers.</p>
<h2>What is a financial promotion?</h2>
<p>Under section 21 of the <a href="https://www.legislation.gov.uk/ukpga/2000/8/contents" target="_blank" rel="noopener">Financial Services and Markets Act 2000</a> (FSMA 2000), financial promotions are communications that invite or induce engagement in investment activity. Only authorised firms or approved entities can lawfully communicate such promotions (unless there is a specific permission or exemption relating to the promotion).</p>
<p>Examples of illegal financial promotions by finfluencers include:</p>
<ul>
<li>Promoting investment opportunities on social media platforms without proper FCA authorisation</li>
<li>Unverified claims about potential investment returns leading to consumer losses</li>
<li>Failure to provide adequate risk warnings in advertisements for complex financial products</li>
</ul>
<p>Any form of communication (including through social media) could be a financial promotion if it includes an invitation or inducement to engage in investment activity. This can include private messaging channels like Discord, Telegram and WhatsApp.</p>
<p>Even when promoting genuine companies, finfluencers may still breach UK law if the subject of the promotion is a private limited company. In addition to the restrictions set out in FSMA 2000, under <a href="https://www.legislation.gov.uk/ukpga/2006/46/section/755" target="_blank" rel="noopener">section 755 of the Companies Act 2006</a>, private companies are prohibited from offering their shares to the public. This means that where a finfluencer encourages followers to invest in a private startup – especially via general social media posts or referral links – they may inadvertently facilitate an unlawful public offering of securities. These actions could trigger not only breaches of FSMA 2000 regarding unauthorised promotions but also contraventions of company law, potentially exposing both the company and the promoter to regulatory enforcement and criminal liability.</p>
<h2>FCA crackdown on finfluencers</h2>
<p>In summer 2024, the FCA announced it had brought <a href="https://www.fca.org.uk/news/press-releases/finfluencers-charged-promoting-unauthorised-trading-scheme" target="_blank" rel="noopener">charges against nine individuals</a> in relation to an unauthorised foreign exchange training scheme promoted on Instagram. Most of these individuals were from reality TV shows Love Island, Geordie Shore and The Only Way is Essex. It was alleged that the reality TV stars were paid to promote financial schemes to a combined following of 4.5 million users.</p>
<ul>
<li>See also: <a href="https://linnearcms.wpenginepowered.com/resources/what-does-new-eu-ai-act-mean-your-business/">What does the new EU AI Act mean for your business?</a></li>
<li>See also: <a href="https://linnearcms.wpenginepowered.com/resources/commercial-law-2024-roundup-key-cases-developments/">Commercial law 2024 roundup: key cases and developments</a></li>
<li>See also: <a href="https://www.linnearlegal.co.uk/resources/non-disclosure-and-confidentiality-agreements-for-businesses/">Non-disclosure and confidentiality agreements for businesses</a></li>
</ul>
<p>Later that year, in November, the FCA announced it was <a href="https://www.theguardian.com/business/2024/oct/22/uk-watchdog-interviews-20-social-media-finfluencers-under-caution" target="_blank" rel="noopener">interviewing 20 influencers under caution</a> and had issued 38 alerts against social media accounts operated by any influencers that may contain ‘unlawful promotions’. These are welcome interventions after what commentators have referred to as a <a href="https://www.cityam.com/fca-set-for-clampdown-on-wild-west-of-social-media-finfluencers/" target="_blank" rel="noopener">regulatory wild west</a> for financial scams and damaging investment advice, and mark a continuation of the <a href="https://www.investmentexecutive.com/news/from-the-regulators/fca-flames-firms-finfluencer-efforts/" target="_blank" rel="noopener">crackdown on finfluencers that the FCA has pursued since 2022</a>.</p>
<p>The FCA has also defined the term ‘significant-influence function’ to classify those who may take on a ‘finfluencing’ role.</p>
<h2>Businesses partnering with finfluencers</h2>
<p>There may be circumstances where it is appropriate for businesses to partner with finfluencers, such as to increase brand awareness, to enhance credibility (although there is often a danger of such partnership doing the opposite) or to reach a new follower or customer base. Businesses partnering with celebrities or well-known individuals, for example as brand ambassadors, is nothing new. What is new, however, is the regulatory terrain in which these partnerships now take place.</p>
<p>The risks specific to finfluencers go well beyond the standard advertising compliance issues that apply to all influencer marketing. For example, under the <a href="https://www.asa.org.uk/codes-and-rulings/advertising-codes/non-broadcast-code.html" target="_blank" rel="noopener">UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing</a> (CAP Code) and the <a href="https://www.asa.org.uk/codes-and-rulings.html" target="_blank" rel="noopener">Advertising Standards Authority</a> (ASA) rules, finfluencers must make clear and prominent disclosures about paid partnerships, sponsorships or affiliate relationships. Failure to do so risks not only reputational damage but regulatory censure and removal of the content. These requirements are well established and apply across all sectors.</p>
<p>However, where a finfluencer strays into financial promotions (e.g. offering shares in a company) or investment advice, a separate – and far more stringent – regulatory framework applies, governed by the Financial Services and Markets Act 2000 (FSMA), the Financial Promotion Order 2005, and rules enforced by the Financial Conduct Authority (FCA). Any communication that invites or induces someone to engage in investment activity is likely to be deemed a financial promotion, which must be issued or approved by an FCA-authorised person. Failure to comply is a criminal offence.</p>
<p>Moreover, businesses promoting investment in their own shares via finfluencers must be acutely aware of the Companies Act 2006, specifically section 755, which prohibits private companies from offering their shares to the public. Even indirect promotions – such as encouraging followers to invest in a startup through social media – can constitute an unlawful public offering. The legal exposure here is significant, and it applies not only to the company itself but also to the individual making or facilitating the promotion.</p>
<p>Unauthorised or misleading financial advice is not a new phenomenon. For decades, finance-adjacent celebrities have hosted shows on TV and written books about finance, and some have come under fire for promoting questionable financial products. In 2012, the US finance celebrity Suzie Orman came under fire for <a href="https://www.reuters.com/article/column-wasik-idCNN1E80C06520120114/" target="_blank" rel="noopener">endorsing a dubious prepaid MasterCard product</a>, and in 2009 she was <a href="https://www.forbes.com/consent/ketch/?toURL=https://www.forbes.com/2009/05/16/fraud-long-term-care-insurance-personal-finance-suze-orman-sued.html" target="_blank" rel="noopener">accused of fraud</a>.</p>
<p>We recommend following the FCA’s guidance on financial promotions, outlined below. The FCA has also published a useful PDF with an example of social media posts that are compliant versus social media posts that are not.  For example, the FCA considers the promotion of ‘dynamic mediums’ (such as Instagram stories) proportionately to the number of frames and amount or volume of important information. Consumers should have a balanced view of benefits and risks.</p>
<h2>FCA guidance on financial promotions</h2>
<p>The FCA has issued the following guidance on financial promotions:</p>
<ul>
<li>Firms should consider how material on social media is distributed, ensuring that material supports consumer understanding if it ends up presented to people through third-party sharing</li>
<li>Firms should be aware of the rulebooks relevant to each type of business, as different sectors have different financial promotion rules</li>
<li>Authorised persons must comply with FCA rules when communicating or approving financial promotions</li>
<li>Communications should be fair, clear and not misleading</li>
<li>Authorised persons communicating or approving financial promotions about qualifying cryptoassets and cryptoasset firms registered with the FCA under the <a href="https://www.legislation.gov.uk/uksi/2017/692/contents" target="_blank" rel="noopener">Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017</a> should familiarise themselves with the rules of the regime with regard to being fair, clear and not misleading</li>
</ul>
<h2>Compliance and legal risks for businesses interacting with finfluencers</h2>
<p>Financial promotions involving finfluencers carry significant regulatory risks. Companies must ensure:</p>
<ul>
<li>Compliance with FCA rules governing financial advertising</li>
<li>Transparency in promotional content, including clear disclaimers</li>
<li>Avoidance of misleading statements that could result in regulatory penalties</li>
</ul>
<p>Breaching rules regarding the general prohibition (carrying on regulated activities in the UK when unauthorised or exempt) and the communication of unauthorised financial promotions is an offence under sections 19 and 23 of the FSMA and can result in repercussions ranging from steep fines to prison sentences of up to two years.</p>
<h3>Reputational and brand damage</h3>
<p>As well as potentially leading to financial and criminal punishments, carrying out unauthorised financial advice or promotions can harm the brand and image of your business, potentially causing an erosion of trust, public backlash and a loss of investors.</p>
<p>One notable example of such risks for businesses is the fintech company Lanistar embroiled in the FCA scandal, which as part of its marketing strategy partnered with Love Island celebrities to compete with Revolut and Monzo. After more than five years of finfluencer-related controversy, Lanistar was hit with a second winding-up petition in February this year.</p>
<h2>How to mitigate finfluencer-related risks</h2>
<p>To minimise exposure, businesses should implement robust risk management strategies, including conducting due diligence checks when selecting and vetting finfluencers for collaborative purposes. Businesses should also be aware even when not working with finfluencers of the FCA’s guidance regarding financial advice and promotions.</p>
<p>Finally, businesses should have contracts in place so that the finfluencer is obliged to ensure that it does not breach the FSMA, setting out what they can and cannot say in respect of the business.</p>
<h2>Staying compliant with FCA guidance</h2>
<p>The rise of finfluencers presents both opportunities and challenges for businesses – and especially businesses in the financial sector. While these influencers can enhance brand visibility and customer engagement, they also introduce regulatory, compliance and reputational risks.</p>
<p>Companies should adopt a proactive approach to risk management by vetting influencers, ensuring compliance with financial promotion regulations and implementing robust monitoring mechanisms. By taking these steps, businesses can safely collaborate with finfluencer marketing strategies while safeguarding their reputation and legal standing.</p>
<p>If your company is considering influencer collaborations, consult with legal and compliance experts to ensure all promotions adhere to FCA guidelines. For further guidance regarding <a href="https://linnearcms.wpenginepowered.com/commercial/">commercial law</a>, <a href="https://linnearcms.wpenginepowered.com/get-in-touch/">speak to a solicitor</a> at Linnear Legal.</p>


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