- ASIC releases guidelines for social media financial influencers and financial service providers.
- Defaulters face millions in fines or serious jail time.
- Some content creators have raised concerns over a lack of clarity in the regulations.
Australian authorities have recently released a guideline for financial influencers and service providers. The guideline will require that influencers and companies not breach the Corporations Act 2001 (Corporations Act) and mislead the public by promoting unlicensed financial services.
Crypto advertising and influencers have caused regulators’ concerns in the last couple of years. Especially over ads that promise unrealistic gains or fraudulent projects.
Australian Securities & Investments Commission (ASIC) has released guidelines for financial influencers and service providers that use these influencers in the country. The regulatory body has warned social media influencers and financial service providers to ensure that services promoted or offered in the case of service providers do not breach the Corporations Act 2001 (Corporations Act).
Influencers have been advised to confirm that the services they promote have Australian Financial Services Licensing (AFS). They are also advised to ensure that their content is balanced and not misleading. In addition to this, financial service companies are also advised that they could be held liable for influencers’ actions. The guidelines reveal that the companies could face huge fines while influencers may receive a jail term of up to 5 years.
“The Corporations Act imposes significant penalties, including up to five years’ imprisonment for an individual and financial penalties into the millions of dollars for a corporation.”
While there is no specific mention of cryptocurrencies in the guidelines, it is not far-fetched to assume that social media crypto influencers would be bound by it. Notably, some content creators have said that the guidelines do not clarify what promotion entails, as a factual piece could be interpreted as a promotion.
Global Crypto Ad Regulatory Efforts
Various approaches have been taken to clamp down what regulators believe to be misleading or harmful advertising. The UK and India are amongst those that have also recently laid out guidelines for crypto advertising.
Meanwhile, the Netherlands has taken a different approach which involves educating students about cryptocurrency investments. The lessons as reported are expected in the coming months.
As regulators try to get a grip on misleading crypto ads, it becomes necessary that investors also become increasingly wary of projects promising unreasonable returns with little utility, even when backed by an influencer. Notably, there have been cases where influencers like Mayweather and Jake Paul have been implicated in rug pulls.