The UK’s regulator is bringing charges against nine British reality TV stars who appeared on popular shows like Love Island and The Only Way In Essex. The nine concerned are being charged with promoting an unauthorised trading scheme using Instagram accounts.
The trading scheme belonged to Emmanuel Nwanze who is alleged to have paid seven of the individuals to help him promote an Instagram account that provided advice on buying and selling CFDs. Regulators on both sides of the Atlantic have been cracking down on the use of ‘finfluencers’ to promote high risk trading schemes when they are not authorised to do so.
Frequently the issue comes from a lack of knowledge on the part of celebrities and their advisors about the extent of financial regulation.
In the frame this time are Love Island competitors Rebecca Gormley, Biggs Chris, Jamie Clayton and Eva Zapico. Also caught up in the case are The Only Way Is Essex stars, Lauren Godger and Yazmin Oukhellou. The winner of Celebrity Big Brother, Scott Timlin, has also been charged.
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The FCA said that the combined following of the Instagram accounts was approximately 4.5m.
Last year former Love Island contestant Sharon Gaffka teamed up with the FCA to help educate finfluencers about the risks of promoting financial products on their social media accounts.
She said: “When you leave a show like Love Island, you are bombarded with opportunities to promote products and work with brands; if like me, you’re new to this kind of work, it can be a little bit overwhelming.”
So what’s gone wrong here?
In the UK the communication of an unauthorised financial promotion per the Financial Services and Markets Act can result in a fine or even a prison term of up to two years.
The SEC has already started to prosecute cases against celebrities accused of using their social influence to promote cryptocurrency trading schemes. The FCA clarified the rules over financial promotions on social media following a $1.26m fine levied against Kim Kardashian by the SEC.
“Any marketing for financial products must be fair, clear and not misleading so consumers can invest, save or borrow with confidence,” said Lucy Castledine, Director of Consumer Investments at the FCA. “Promotions aren’t just about the likes, they’re about the law. We will take action against those touting financial products illegally.”
The FCA warned that Kardashian’s offence may have been the financial promotion with the single biggest audience reach in history, given the huge size of her following, which currently stands at 364 million.
Sarah Pritchard, Executive Director at the FCA, said: “We’ve seen more cases of influencers touting products that they shouldn’t be. They are often doing this without knowledge of the rules and without understanding of the harm they could cause their followers. We want to work with influencers so they keep on the right side of the law, as this will also help protect people from being shown scams or investments that are too risky.”
Be wary of get rich quick schemes
The FCA says it is worried that too many financially vulnerable people are being lured into ‘get rich quick’ schemes, with 14% getting into debt during the pandemic to speculate in crypto assets for example.
“Regulators are clearly horrified at the damage superstar celebrities can do to the bank balances of vulnerable consumers, who are influenced by almost every move they make,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. “The delusions of quick riches can spread far too rapidly on social media with speculation amplified by reposts by millions of followers.”
