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The new head of the Treasury select committee said MPs should consider the phenomenon of social media ‘finfluencers’ in a bid to protect consumers from reckless investments.
Labor MP Dame Meg Hillier promotes investment plans and provides financial advice online to help people understand how they operate within existing regulations They hope to invite social media celebrities to evidence sessions.
The topic is likely to come up at Financial Conduct Authority CEO Nikhil Rati’s hearing on Tuesday.
In May, the watchdog arrested nine people, including several former stars of reality shows Love Island and The Only Way Is Essex, for making unauthorized financial transactions with their combined 4.5 million social media followers. He was charged with promoting the scheme.
“I’m concerned that people are getting their information from these sources,” Hillier told the Financial Times. “This can be traced back to financial education for young people. It’s about risk appetite, and that’s the big issue being discussed.”
There’s a difference, she added, between people who rely on experts like Martin Lewis, founder of the Money Saving Expert website, and those who rely on “random people on TikTok.”
The FCA is cracking down on “finfluencers” who use social media accounts to promote financial plans and businesses. Earlier this year, the regulator set out guidance on financial promotion on social media to “address emerging consumer harms arising from social media use”.
The regulator has promised to crack down on those who are not licensed and “unqualified to give financial advice to the young and impressionable age groups that follow them”.
Since the May action, the regulator has questioned 20 alarmed finfluencers and issued 38 warnings to social media accounts they run that “may contain illegal promotion” uttered.
Conveying a fraudulent financial promotion is a crime under the Financial Services and Markets Act 2000, punishable by a fine or up to two years’ imprisonment on conviction.
Steve Smart, the FCA’s co-head of enforcement, said last year that finfluencers “need to check the products they promote to ensure they are not breaking the law and putting the lives and savings of their followers at risk”. .
Mr Hillier said it was at a “very early stage” in terms of considering whether regulation needed to be tightened, but the government said it would provide financial advice and informal guidance to clarify what was important. I would like to consider this topic in relation to my plans.
Similar concerns may exist in the field of artificial intelligence, she added. Online platforms may be a convenient place to seek personal financial guidance, but it’s difficult to “make sure you’re safe.”
Mr Hillier’s interest in the sector comes as the UK government aims to increase risk-taking in the financial sector to boost growth.
“It’s interesting that the Labor government came in and strengthened the relationship with the city,” she said.
“We’re on a mission to get people to invest more productively. . . . It might be better to take more risks. But if that risk comes from someone who’s not regulated, it’s very interesting.” Problems may occur.”
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The committee will also question Mr Rati about the FCA’s “secondary purpose” from the government, which is to help boost growth.
“The industry knows what they want, but he’s got to make sure there’s a balance. We’re going to look into him on that,” Hillier said.
“There’s a lot of focus on growth through the second goal and growth through the financial services sector. . . . We want to see what that has real-world implications for voters.”
