Many of those using social media regularly are aware of the increasing popularity of finfluencers (financial influencer) promoting "get rich quick" schemes to their large followings (particularly younger age groups). As we will see in this article, there is a high risk this could go very wrong if the finfluencer is unaware or does not comply with the requirements of the regulatory regime.
British reality television stars are among the 9 people who have been charged with promoting unauthorised trading schemes on Instagram to the collective sum of 4.5 million followers. It is alleged that they posted about advice on buying and selling contracts for difference (CFDs) investments, which are high-risk investments that are used to bet on the price of foreign currencies. For context, CFD's involve using debt to try and amplify returns, which can result in investors losing more than they invested. The Financial Conduct Authority (FCA) has previously said that 80% of customers lose money when investing in CFD's.
The following stars were charged:
- Scott Timlin (Geordie Shore)
- Biggs Chris (Love Island)
- Eva Zapico (Love Island)
- Jamie Clayton (Love Island)
- Rebecca Gormley (Love Island)
- Lauren Goodge (The Only Way is Essex)
- Yazmin Oukhellou (The Only Way is Essex)
Each of the defendants are charged with unauthorised communications of financial promotions. 8 of the 9 defendants pleaded not guilty to the charges with Eva Zapico, who did not attend the hearing, has a plea hearing set for September 2024. The trial date has been scheduled for 1 February 2027 and 15 March 2027. This will be a lengthy awaited trial which is the earliest date that the Southwark Crown Court can accommodate this high-profile case due to their backlog.
Appearing alongside the stars in court are Emmanuel Nwanze and Holly Thompson, who are alleged to have run the unauthorised investment scheme. Emmanuel Nwanze faces one count of breaching the General Prohibition under the Financial Services and Markets Act 2000 (FSMA) for carrying out a regulated activity in the UK without being authorized by the Financial Conduct Authority to do so. These charges are criminal offences under FSMA and so they could possibly face up to two years in prison if convicted.
HC Comment:
The significance of this ongoing case is that the FCA (the lead regulator) has shown that their position is to increasingly scrutinise and enforce unauthorized communications of financial promotions online by finfluencers.
The FCA had recently released its finalised guidance on financial promotions on social media, which provides clarity on expectations for authorised persons who use social media as a marketing tool and unauthorized persons. Key themes focused on ensuring marketing strategies are communicated legally to restrict unsolicited promotions via social media, to deliver good outcomes for retail customers (e.g., the Consumer Duty) and overall to provide a fair and balanced view of the product being promoted. The FCA guidance is a good reference for firms developing a social media strategy.
In the past, the FCA partnered with the Advertising Standards Authority (ASA) to create a helpful infographic on this topic.
The upcoming trials are expected to shed light on the actions of the defendants and further details regarding the scheme and will provide an important reference for how the unauthorised promotion of financial products online will be handled by the law going forward. This ongoing case is a reminder to finfluencers to ensure that their use of social media to communicate financial promotions does not sidestep matters such as consumer protection and relevant advertising standards.
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