Keeping up with the finfluencers: Why it’s not what you say but who you are

The recent charges imposed on a (very) famous influencer in the US by the US Securities and Exchange Commission is informative to the current discussion and debate in Australia regarding the Quality of Advice Review.

The charges (which were ultimately settled for a sum of $1.26 million and a 3-year embargo on promoting crypto asset securities) were imposed in relation to the promotion of crypto asset securities, in circumstances where the influencer in question had failed to disclose the remuneration they received in relation to such promotion.

While many crypto assets and other digital assets remain largely unregulated in Australia (in part, due to complexities and technical issues relating to the definition of a “financial product”), this case still has direct application to the Australian context because it demonstrates that an endorsement of financial products by a (famous) influencer can constitute financial advice by reason of it being, at the very least, an implied recommendation.

It is not even necessary for words to be uttered for an endorsement and hence, an implied recommendation, to occur. It may well just be an action.

In the case in point, the influencer posits a question on their Instagram as to whether their followers are “into crypto????” It also carried a disclaimer to the effect that (in relation to the post): “This is not financial advice but sharing what my friends just told me about the EthereumMax token!”

In the context of financial product advice in Australia, an implied or express recommendation can result from two key factors in this context, namely: (1) the status of the social media influencer; and (2) the circumstances (and the intention of, or effect of) the interaction.

In particular, if the endorsement post is made by a famous influencer, the greater the chances the audience will view this as a recommendation of the product and that the regulator (and the courts) will view it as financial product advice. This is because of the pulling power of the influencer. Indeed, ASIC released Information Sheet INFO 269 Discussing financial products and services online earlier this year, stating: “If you’re an influencer who receives benefits or payment for your comments in relation to financial products, you’re more likely to be providing financial product advice because it indicates an intention to influence the audience.”[1] One can imagine that even a relatively passive endorsement by a celebrity or influencer, such as wearing a garment with the logo associated with a particular financial product, will be construed as a recommendation of the product and hence, financial product advice.

A disclaimer arguably will not assist, as the fundamental nature of the endorsement cannot be negated or neutralised by such contradictory disclamatory text.[2] The overall impression and circumstances of the content must be considered.[3] These are complex matters of nuance and degree, and the identity and pulling power of the influencer are central considerations in this equation.

This is yet another example which supports the continued regulation of general advice in the context of often powerful endorsements, as well as the power of social media and influential personalities to influence consumer conduct generally (not to mention the conduct of the particularly vulnerable).

The HSF team closely follows and comments on developing law regarding general and personal advice and financial product distribution. Get in touch with one of our experts below.

[1] ASIC Information Sheet 269 Discussing financial products and services online.

[2] ASIC RG 36 Licensing: Financial Product Advice and Dealing (RG 36.31).

[3] ASIC v Westpac [2019] FCAFC 187, [12], [20], as upheld in Westpac v ASIC [2021] HCA 3.