Tab 2 · ASIC
Financial products on social media: when a licensee pays the poster
ASIC’s Information Sheet 269 is written for two readers: influencers who discuss financial products online, and the Australian financial services (AFS) licensees who use them, who ASIC says may be liable for the influencer’s misconduct. For the licensee, the sheet asks for four things: due diligence, risk management and monitoring, enough compliance resourcing, and care that a product under the design and distribution obligations is promoted only to its target market.
General information about ASIC’s published guidance, not financial or legal advice. ASIC describes the sheet as a summary that does not cover the whole of the law. The official place to check is ASIC.
Two readers, one sheet
ASIC issued Information Sheet 269 in March 2022. Moneysmart describes financial influencers, or finfluencers, as people who discuss financial products and services online, on social media or a website. Most of the sheet speaks to them, with worked examples of what they might say. This guide takes the other half: the business that holds the licence and pays, gifts or engages someone to post.
ASIC watches selected online discussion by influencers who feature or promote financial products, looking for misleading claims and unlicensed financial services. Financial products, on ASIC’s list, run well beyond shares: super, life and general insurance, interests in managed investment schemes, derivatives and margin lending are on it too.
The licensee’s four points
Under the heading for AFS licensees who use influencers, ASIC says a licensee may be liable for their misconduct and lists four points:
- Due diligence. If the influencer is acting on the licensee’s behalf, ASIC says they are its ‘representative’ under the financial services laws, which brings further obligations, among them making sure the influencer is adequately trained and complies with those laws.
- Risk management and monitoring. Systems and processes suited to the purpose, so the influencers a licensee uses are not providing unlicensed financial services.
- Compliance resourcing. Enough of it to monitor the influencers the licensee uses.
- The target market. Whether a product the influencer promotes is subject to the design and distribution obligations, and if so whether the licensee has taken reasonable steps so the influencer promotes it only to consumers in the target market. Those obligations took effect in October 2021.
Why paying someone changes the picture
ASIC defines financial product advice as a recommendation or opinion intended to influence a person’s decision about financial products, or one that could reasonably be seen as intended to. It says an influencer who receives payment or benefits for comments about financial products is more likely to be giving that advice, because the payment points to an intention to influence.
Under the Corporations Act, running a financial services business with no AFS licence is an offence, unless the person is a licensee’s authorised representative or an exemption applies, and ASIC notes penalties of up to five years’ imprisonment for an individual and fines into the millions of dollars for a corporation. An AFS licence authorises the licensee and its representatives to provide financial services, and ASIC lists acting as an authorised representative of a licensee as one route to providing them. ASIC adds that it takes enforcement action where that is in the public interest.
Moneysmart puts the same line from the audience’s side. Factual information about products needs no licence, but a finfluencer who is not licensed, not an authorised representative and not exempt cannot lawfully give financial advice in Australia.
Disclosure, in two senses
| Kind | What ASIC says |
|---|---|
| Disclosure to followers | ASIC tells influencers to take care with paid work and sponsorships, that they may have to disclose to followers any payment or benefits they receive, and to use a documented agreement whose terms they understand. Its heading for this counts non-monetary benefits as payment. |
| Disclosure documents | Under Part 7.7 of the Corporations Act, an entity giving financial product advice to retail clients must give a Financial Services Guide or make website disclosure information available, give a general advice warning with general advice, and give a Statement of Advice with personal advice. Personal advice to retail clients also brings the best interests duty. |
Misleading posts need no licence
The ban on misleading or deceptive conduct about financial products applies whether or not the person is licensed. ASIC says statements should be true, accurate and capable of being backed up, and a prediction about a future return or level of risk needs reasonable grounds. Intention doesn’t settle it: ASIC looks at the overall impression a post creates and whether it misleads, or is likely to mislead, someone in the audience it actually reaches, not the audience the poster hoped for.
Moneysmart adds a pattern from ASIC’s surveillance: content using lavish lifestyles, sports cars and other luxury goods to promote a financial product or trading strategy sometimes made misleading claims about the prospects of success.
ASIC’s own reading list
The sheet names the regulatory guides it considers relevant:
- RG 36, on licensing for financial product advice and dealing.
- RG 234, good practice guidance on advertising financial products and services, credit included.
- RG 244, on giving information, general advice and scaled advice.
- RG 274, on the product design and distribution obligations.
ASIC also takes reports of unlicensed activity through the How to complain page linked from Information Sheet 269.
Paid posts about health services and medicines carry their own rules, set out in the health practitioners guide and the medicines guide.