Thanks to proposed new regulations, Australian finance influencers may face harsh punishments if caught giving advice without a license on social media.
The Australian Securities & Investments Commission, or ASIC for short, released new regulations as they crack down on social media influencers giving out financial advice. “Finfluencers” have been caught in the past recommending specific products or stock, which is illegal. Now, unlicensed finance influencers in Australia may face severe punishments such as five years imprisonment or fines reaching millions of dollars.
The licensing provisions under the Corporations Act 2001 (the Act) apply to persons who provide financial product advice or arrange for a person to deal in a financial product when carrying on a financial services business. Carrying on an unlicensed financial services business is an offence under the Act, unless authorised as a representative of a licensee or relying on an exemption.
The Act imposes significant penalties, including up to five years’ imprisonment for an individual and financial penalties into the millions of dollars for a corporation.
The law also prohibits conduct that is misleading or deceptive, or is likely to mislead or deceive, in relation to financial products or services. An influencer does not need to be licensed to breach the misleading or deceptive provisions.
Finance influencers have become more prominent on TikTok and Instagram since the pandemic, with the supposed intention helping young people manage their money better. They also experienced a surge in popularity last year due to the GameStop stock short squeeze and Dogecoin rush.
According to a survey the government institute published in December 2021, 28 percent of young people follow at least one finfluencer on social media, and up to two-thirds of those people have reported changing at least one of their financial behavior. One of the proposed reasons for this phenomenon is that financial advice isn’t taught in schools outside of economics classes.
@humphreytalks Rich Dad Lesson on the Market using an iPhone analogy. #personalfinance #apple ♬ original sound – Humphrey Yang
But people using the internet to seek financial advice isn’t new, as finance forum sites and subreddits exist. If you do wish to get legitimate financial advice, you’re better off speaking to a licensed financial advisor or your local bank.