TikTok influencers threatened with prison over dodgy financial advice

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Kim Kardashian was fined £1m for failing to disclose in online cryptocurrency promotions that she had been paid to advertise – Julien de Rosa/AFP

Influencers could face up to two years in prison or unlimited fines for promoting financial products, the financial regulator has warned.

The City watchdog, the Financial Conduct Authority (FCA), has issued guidance for influencers advertising using memes, short videos including reels, and gaming streams.

It follows a rise in celebrities backing investment opportunities and influencers handing out unregulated advice on social media. Some, including Kim Kardashian, have already been fined for rule breaches over promoting cryptocurrencies, with experts warning financial advice from others on social media risks becoming a “wild west” for poor advice.

The FCA said it had stepped up “scrutiny of financial promotions”, last year removing more than 10,000 “misleading adverts”, up from around 8,500 in 2022.

YouTuber Jake Paul (r) was charged with promoting cryptocurrencies without disclosing he received compensation for doing so – Kevork Djansezian/Getty Images

In updated guidance, the regulator said risk warnings on TikTok and YouTube should be visible throughout videos containing financial promotions and not just feature in the caption. For Instagram-style carousel posts, with multiple slides, warnings must be included on every picture.

There are strict rules about who is allowed to promote financial products, under the Financial Services and Markets Act 2000. It is a criminal offence to promote products that have not been properly approved by an FCA-authorised person.

Those who do not follow the rules run the risk of falling foul of the regulator’s financial promotion rules, and could face up to two years in prison, as well as an unlimited fine, the regulator said.

So-called “finfluencers”, or “financial influencers”, offer information about financial products online, but are not usually qualified to offer financial advice, an activity that is regulated in the UK.

Some work directly with financial companies to review and promote products, but the guidance will apply even when influencers are not being directly paid to advertise.

Lindsay Lohan was among a group of celebrities who agreed to pay a $400,000 penalty to settle charges of promoting cryptocurrencies without disclosing they were being compensated – James Devaney/GC Images

Nearly 80pc of Generation Z and Millennials have used social media to find financial advice, a survey from the Financial Services Compensation Scheme, a lifeboat fund, found last year.

Lucy Castledine, director of Consumer Investments at the FCA, said: “Any marketing for financial products must be fair, clear and not misleading so consumers can invest, save or borrow with confidence.

“Promotions aren’t just about the likes, they’re about the law. We will take action against those touting financial products illegally.”

Laura Suter, director of personal finance at online platform AJ Bell, said: “There is a darker side to many of these posts, and a significant risk of ‘finfluencers’ spreading misinformation or encouraging high-risk behaviour, such as day trading in individual stocks, without properly explaining those risks.

“There’s a real danger that financial social media becomes a wild west, rather than a space to get accurate, clear information on financial planning,” she added.

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Regulators have become increasingly concerned about the ability of influencers to encourage their followers to purchase risky assets.

Kim Kardashian paid a $1.26m (£1m) fine to the US Securities and Exchange Commission (SEC) in 2022 and agreed not to promote crypto assets for three years, after she failed to disclose that she had been paid $250,000 for advertising cryptocurrency EthereumMax online.

Michael Owen was approached by the ASA over his tweet about NFTs, although no action was taken – Nigel French/PA

Other celebrities, including YouTuber Jake Paul and actress Lindsay Lohan, were also charged with “illegally touting” cryptocurrencies “without disclosing that they were compensated for doing so and the amount of their compensation”.

They agreed, alongside others, to pay a total of more than $400,000 in “disgorgement, interest, and penalties” to settle the charges, without admitting or denying the SEC’s findings.

In 2022, Michael Owen was approached by the Advertising Standards Authority (ASA) over a tweet which read “My NFTs will be the first ever that can’t lose their initial value”, according to reports. The post was later deleted. No other action from ASA was taken.

Susannah Streeter of brokers Hargreaves Lansdown, said: “Regulators are clearly horrified at the damage superstar celebrities can do to the bank balances of vulnerable consumers, who are influenced by almost every move they make.

“The delusions of quick riches can spread far too rapidly on social media with speculation amplified by reposts by millions of followers.”