'Finfluencers' Beware: UK Financial Watchdog Warns About ‘Misleading’ Crypto Memes

‘Finfluencers’, which is a relatively new term for financial influencers, are not anything new. If we think of the American stockbroker Peter Schiff, his video from over 12 years ago arguing with Occupy Wall Street gained millions of views, long before modern-day influencer infrastructure was built. Schiff was also known to make predictions and claims to have predicted the 2008 crisis. We can retrospectively apply this term to him, even though it wasn’t known in 2008.

However, for better or worse, ‘finfluencers’’ roles within crypto are very much their own thing. Personalities like Schiff, who is an advocate for bringing back the Gold Standard, could never truly influence the price of gold. But with the ease of creating new Alt Coins and NFTs, these smaller markets and assets can very much be influenced. Market manipulation is not looked on fondly by regulators like the Financial Conduct Authority (FCA) and the U.S. Securities and Exchange Commission (SEC).

But recent initiatives by the FCA and the Advertising Standards Authority (ASA) have taken a different approach to simply market manipulation—a consumer-first one. As a result, there is a crucial need for stringent adherence to advertising standards within this space that reach far beyond influencing markets, but simply the nature of the information we tell an audience.

Understanding the Regulatory Environment

A significant collaborative effort, including partnerships with public figures such as Sharon Gaffka, has been launched to educate influencers about the complexities and responsibilities involved in promoting financial products. In particular, “get rich quick” schemes.

The FCA has introduced new regulations that require a cooling-off period for first-time crypto investors and ban certain incentive structures like 'refer a friend' bonuses, reflecting a broader legislative push to bring crypto promotions under regulatory scrutiny. These measures aim to ensure that promotions are “clear and fair” but also provide adequate risk warnings to protect consumers.

This educational push is enhanced by the development of resources like infographics designed to aid influencers in understanding what constitutes a legal financial promotion. The FCA's ongoing commitment to integrating its efforts with other regulatory bodies shows an environment where compliance and consumer protection are the core goals.

In the UK, the regulatory landscape for financial promotions is defined by strict compliance and transparency standards enforced by the FCA. This is traditionally targeted at companies providing services, but recent regulations have tightened the controls on how cryptocurrencies can be marketed to consumers. 

Influencers are Businesses

This now includes the specific role of influencers in the financial promotion ecosystem. Influencers (which, of course, should be framed as a traditional business, though many can lose sight of this) engaged in promoting financial products must tip-toe these regulations more carefully, as any promotional activity must be compliant with FCA standards. 

This includes accurate disclosure of the risks and a clear indication of the promotional nature of the content. The use of memes in financial promotions, particularly prevalent in the crypto sector, must also adhere to these standards, ensuring that such communications do not mislead or exploit consumer behaviour.

These aren’t just words, either. The FCA has been active in enforcing these regulations. For instance, the FCA has recently issued numerous warnings and taken action against crypto firms and influencers who failed to comply with the financial promotion rules. 

For firms and influencers alike, understanding and adhering to these guidelines is not just about legal compliance but also about maintaining trust and credibility in a market. Crypto continuously faces accusations surrounding its integrity or safety, so influencers must go above and beyond to stay above board.

For Influencers: Compliance and Best Practices

Know the Law

In the UK, the FCA is who you are dealing with in regards to financial promotions on social media. Influencers, especially those involved in the promotion of financial products like cryptocurrencies, must understand that any communication that includes an invitation or inducement to engage in investment activity can be considered a financial promotion under the Financial Services and Markets Act 2000. This applies even if the communication is made through private channels like Discord or Telegram. This is an important point to remember as there are no closed community exceptions.

The FCA has been clear that both authorised and unauthorised entities engaging in financial promotions must adhere to strict guidelines that ensure promotions are “fair, clear, and not misleading”. Unauthorised influencers who engage in financial promotions without prior approval from an authorised firm are at risk of legal penalties, which may include criminal prosecution. Recent regulatory updates have increased scrutiny on social media promotions, mandating that all communications are upfront about the risks involved and do not exploit consumer biases or mislead consumers about potential returns.

Transparency and Disclosure

Transparency is paramount in maintaining trust and legality in financial promotions. Influencers are required to disclose any material connections to the products they endorse, including personal or financial interests. This not only involves being transparent about the nature of the endorsements but also making it clear when posts are sponsored.

The FCA’s guidelines stipulate that financial promotions must not be misled by omission. So, influencers must ensure that all necessary information concerning risks and benefits is clearly communicated. They must also avoid presenting opinions as facts and should have evidence to back up any claims made. For influencers, this means that any claim that suggests potential financial gains must be presented with clarity concerning the associated risks and should not exaggerate the benefits to mislead followers.

Adherence to these rules not only helps avoid legal repercussions but also plays a critical role in protecting the audience from making uninformed or unsafe financial decisions based on promotional content.

Creating Lawful Content

Influencers must ensure that any financial promotion they communicate is balanced, includes the right risk warnings, and helps the audience make informed financial decisions. The FCA emphasises that promotions must not only grab attention but also adhere to legal standards. This involves providing a balanced view that doesn't overemphasise potential benefits without a clear explanation of risks. The best way to comply with this is to see yourself as an educator. Educational content is more likely to be balanced and include risk warnings, rather than content that is solely entertainment or investment-driven.

The FCA has updated its guidance to address the complexities of modern social media platforms, where the brevity of content like tweets or the fleeting nature of Instagram Stories can make compliance challenging—not to mention live streams. Each piece of promotional content must stand alone in its compliance, meaning that it must be understandable and not misleading without needing to refer to other content. This is very important to remember because it can be difficult when you expect your audience to have followed your message over a long period of time. In other words, the promotional content must be created as if you’re targeting new followers, whether they are new or not. Grab our infographic for marketers here to learn more.

For platforms that restrict the amount of information, such as Twitter, influencers need to be particularly cautious to include necessary disclosures and risk warnings in a clear manner. It may even be worth migrating to a more expressive platform that is designed for more context.

Consumer Duty

Firms must consider the 'Consumer Duty' standards, which emphasise that communications must not only be clear but also designed to support positive outcomes for consumers. This means tailoring financial promotions to be understandable and beneficial for the target audience, aiding their decision-making process in a straightforward and transparent manner. As part of this duty, the content strategy must account for the characteristics of the chosen media platform and the susceptibilities of its audience to ensure that the promotions are appropriate and effective.

Navigating the Pitfalls of Crypto Promotion

The FCA has outlined specific areas of concern and common pitfalls associated with the promotion of crypto-assets by influencers, which are needed to understand to avoid regulatory repercussions. 

Firstly, a significant area of concern is the portrayal of crypto-assets as safe or secure investments without adequate disclosures of risks. If you cannot see these risks yourself, then this is a bigger concern that needs to be addressed, because even market-leading Bitcoin contains vast amounts of volatility and even existential risk.

Influencers often fail to include sufficient risk warnings, or place them in a manner that is not prominent, thus, not meeting the FCA’s requirements for clarity and visibility. You need to be detail-oriented here, even thinking about font colour and size.

Another common mistake is the use of misleading claims that could exaggerate the ease of use, security, or potential returns of crypto-assets. Such promotions can lead to misunderstandings among consumers about the high risk of losses. The FCA has noted that promotions sometimes use small fonts or insufficiently contrasting text, making important information about risks hard to read or easy to overlook. Or, if it’s a video message, they may try to avoid using slang or regional dialect when speaking about the risks.

The FCA has also introduced strict rules that prohibit certain marketing practices such as the use of financial incentives (e.g. refer-a-friend bonuses) to attract new investors without proper education and risk assessment. This measure aims to ensure that potential investors are not unduly influenced by offers that do not fully outline the potential negative outcomes. 

One of the main mistakes that underlie all other mistakes made is influencers simply not understanding the service or asset they are promoting. For example, athletes who are not involved in the financial world are being paid to promote a new crypto exchange platform or NFT. This becomes the main thing to address to avoid not addressing risks that you’re unaware of.

For Marketing Teams: Partnering With Influencers Safely

In the current regulatory environment, marketing teams need to be meticulous when selecting and collaborating with influencers to promote financial products. The first step is to choose influencers who not only have a good understanding of the financial sector but are also perceived as trustworthy by their audience. 

Once the right influencers are on board, it is important for marketing teams to work closely with them to ensure that all content meets the regulatory standards. This collaboration should include clear guidelines on the necessity of transparency and the importance of including all required risk warnings in the promotions. 

It’s also important that the content remains true to the influencer's voice to maintain authenticity while still aligning with the legal requirements. If it feels like the risk warnings are box-ticking and forced, then the influencer’s voice may not be the right one. Instead of changing it, changing the influencer you use may be more appropriate.

Marketing teams must also oversee the content creation process to ensure compliance. This oversight can include pre-approval of posts and real-time monitoring to manage any potential issues that arise after the content goes live. Additionally, there should be an agreement in place that clearly outlines the expectations and responsibilities of both the influencer and the marketing team. This contract should specify what happens if content needs to be adjusted or retracted to maintain compliance with FCA regulations. 

Final Word

As we are seeing, having such influence comes with a huge responsibility regarding ordinary people’s life savings, pensions, and rent money. The notion of it being solely their responsibility is a no-go when it comes to the FCA. And, by nature of influencing others means that the viewer may not have otherwise made certain financial decisions. So, the responsibility is shared.

Whilst all of the compliance requirements may seem daunting, you will most likely stay on the right side of the law if you fully understand the product you’re selling and its risks, and communicate them in a fair way. 

While it’s certainly wise to learn about what constitutes fair and transparent, the rules are mostly intuitive. So, baking this into your brand’s voice, as opposed to it being an afterthought, is the safest way to go about compliance because it will ensure you’re compliant even when you’re not thinking about it, such as briefly referring to it in a live stream. Reach out to a member of our Englebert team today to help ensure you stay compliant.