NASAA Warns Investors on "Finfluencer" Marketing
The North American Securities Administrators Association ("NASAA") urged investors to be cautious of "finfluencers" marketing on social media. NASAA defined a "finfluencer" as "a person who, by virtue of their popular or cultural status, has the ability to influence the financial decision-making process of others through promotions or recommendations on social media."
In an Investor Advisory, NASAA provided (i) information for investors to better understand how finfluencers operate, (ii) guidance on how to handle receiving advice on social media, and (iii) red flags to help identify "dubious advice, unverifiable or outdated financial credentials, or investment recommendations not backed up by accurate data."
NASAA explained that finfluencers typically operate by publishing posts or videos to their social media accounts, often in an entertaining style to ensure posts will be shared with other potential buyers. Finfluencers are sometimes compensated by the business offering the product or service, the platform on which the message appears or by an undisclosed financier. NASAA noted that "influencer marketing" is a legitimate strategy, but warned that "[f]influencers are testing the limits of what is considered regulated investment advice and protected free speech." NASAA cautioned that financial advice differs from celebrity endorsements because of the strict regulations and stringent rules about performance claims and disclosing potential conflicts of interest. Accordingly, NASAA encouraged investors to report concerns about finfluencers by contacting the social media platform on which they communicate.
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