Social media sites warned over risky investment offers

City watchdog flags up platforms such as YouTube and TikTok in promoting investments to inexperienced consumers

The City regulator has warned social media sites that it may take action if they continue to promote risky and sometimes fraudulent investments to often inexperienced consumers.

The Financial Conduct Authority is concerned about the growing influence that sites such as YouTube, Instagram and TikTok are having on a new breed of mainly younger DIY investors, whom it believes are taking big financial risks when investing in cryptocurrencies, foreign exchange trading and other high-risk products.

In a speech, Nikhil Rathi, the FCA’s chief executive, said the big internet companies “need to take greater responsibility” for their role in connecting consumers with these investment offers. He said too many of the “investment opportunities” that people were finding online “prove too good to be true”, and the FCA was looking at how social media sites were adapting to new rules on so-called financial promotions. “If needed, we will take action,” he said.

The FCA also has search engines such as Google in its sights; and has accused platforms of profiting from investment scam adverts. The regulator’s powers in this area include being able to fine companies and ban adverts. Previously, online platforms were exempt from the financial promotions regime, but this exemption was removed when the UK left the EU.

The FCA regulates advertising for most financial services, including many types of investment products; under the rules all financial promotions “must be clear, fair and not misleading”. The regulator’s website, which was updated this month, makes clear that these rules apply “regardless of the media type”, adding that financial promotions can take the form of a website, Facebook post or tweet.

Rathi, in his speech to UK FinTech Week, said: “We see no reason why different standards should apply to a search engine or social media compared to a newspaper. If these platforms choose to display, and profit from, adverts for risky – and in some cases fraudulent – investments, they should also comply with financial promotions rules.”

He added that the influence these websites had on consumers – especially newer DIY investors – was growing. Compared with more experienced investors, those with less than three years’ experience were more than twice as likely to rely on YouTube or social media sites for research or finding investment opportunities, according to the regulator.

“Consumers shouldn’t be subject to lower standards or greater risks because they find an investment online … Consumers – and firms – benefit when financial promotion rules apply fairly to both digital and more traditional media,” Rathi said.

Social media has been a big driver in the rapid rise in the numbers of young investors in recent years. On Instagram there are millions of posts featuring #investing and #finance, while on TikTok videos featuring such content have generated billions of views.

In March, the FCA said that these often younger and more diverse DIY investors were making riskier choices because they liked the challenge and the status this conferred, and they were often swayed by the influencers they followed.

In September 2020 the regulator said it was important that firms such as Google “bear clear legal liability” for the financial promotions they passed on, at least to the same extent as traditional publishers.


Rupert Jones

The GuardianTramp

Related Content

Article image
Cryptocurrency scams triple in a year – at £27m total cost to victims
Fraudsters use professional-looking websites and promise high returns

Rupert Jones

20, May, 2019 @11:01 PM

Article image
Bitcoin: be prepared to lose all your money, FCA warns consumers
Regulator cautions public over risk of products promising high returns from cryptoassets

Kalyeena Makortoff Banking correspondent

11, Jan, 2021 @10:39 AM

Article image
People could be asked to watch educational video before investing
Financial Conduct Authority says current ‘risk warnings’ are often ignored by consumers

Rupert Jones

29, Apr, 2021 @4:15 PM

Article image
Bitcoin could be overseen by UK's financial regulator
Treasury presses for FCA to regulate cryptocurrencies to protect consumers and prevent money laundering

Julia Kollewe

20, Dec, 2018 @12:38 PM

Article image
Vaporiser maker to be first medical cannabis firm listed in London
Kanabo issues prospectus for London Stock Exchange after clearance from FCA

Rob Davies

29, Jan, 2021 @5:27 PM

Article image
Buy2Let Cars investors fear serious losses as firm goes into administration
City regulator faces questions as to why firm was allowed to trade despite concerns over its finances

Rob Davies

16, Mar, 2021 @4:18 PM

Article image
Liam Fox seeks to spearhead tech giants’ grab for ‘digital oil’
Britain’s trade secretary says he wants to discuss rules on customs duties at WTO summit, but campaigners allege a broader agenda

10, Dec, 2017 @7:00 AM

Article image
Democratising finance for all? An investment app for amateurs and a student trader's death
20-year-old killed himself after mistakenly believing he had lost $730,000 through the Robinhood app

Rob Davies

18, Jul, 2020 @7:00 AM

Article image
Is Facebook's Libra currency a case of corporate megalomania? | Nils Pratley
The planned cryptocurrency has big questions to answer, not least on transparency and trust

Nils Pratley

18, Jun, 2019 @3:13 PM

Article image
FCA to shake up fund management to get better deal for investors
Regulator urges firms to publish ‘all-in fee’ as it recommends review of investment consultant market

Jill Treanor

18, Nov, 2016 @11:28 AM