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Buyer beware for dodgy finfluencers

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By John Beveridge - 
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The federal government said it will not be responsible for compensating consumers who fall for bad financial advice from social media influencers.


The federal government has strongly backed the need for buyers to do their own research and beware of dodgy financial ‘finfluencers’, revealing that consumers who are sucked in won’t get their money back.

A week after Small Caps warned that research beat regulation when it came to trusting finfluencers, Senator Jane Hume warned consumers who fall victim to bad advice not to look to the government for compensation.

Speaking at the Association of Financial Advisers national conference, the minister for superannuation, financial services and the digital economy said it was up to consumers not to fall for online scams and tricks.

“I believe in personal responsibility and common sense. For that to work, we must make sure that consumers have access to the information that they need to make informed decisions,” she said.

No need for nanny culture

Senator Hume said she would not resort to banning such advice or “perpetuating a nanny state culture”.

“Consumers must have the information to know that the influencer is not an accredited adviser, and not to assume that they will act in their best interest and give them unconflicted advice.”

Senator Hume said that while she doesn’t want to prevent people from being interested in finance or expressing their views, that freedom did not translate into a free pass to scam or mislead.

“There’s never an excuse for that. But the existence of a small number of unscrupulous actors doesn’t justify wholesale constraints and policing and freedom of expression for everyone,” she said.

Better Advice Bill could improve identification of registered advisers

Senator Hume said the biggest consumer protection was strong licensing of financial advisers and she pointed to the Better Advice Bill which from the start of 2022 would create a single disciplinary body and a more up-to-date and accurate financial adviser register – assuming the legislation passes through the Senate.

The progress of that bill – which emerged after the Hayne Royal Commission – has been slowed after a successful amendment from independent Senator Rex Patrick who wants senators to see the final regulations before voting on the bill.

ASIC ramping up enforcement of pump and dump schemes

Meanwhile, the Australian Securities and Investments Commission (ASIC) has ramped up enforcement activities against online “pump and dump” activities, warning perpetrators that they could face jail.

ASIC said there has been a rise in pump and dump activity recently and warned brokers and companies that they should report any suspicious activity.

A range of uranium and other small stocks have recently been targeted by pump and dump players on closed messaging apps such as Telegram, with some stocks jumping dramatically.

“ASIC has recently observed blatant attempts to pump share prices, using posts on social media to announce a target stock, a designated time to buy and a target price or percentage gain to be reached before dumping the shares,” the regulator said before the start of trading last Thursday.

“In some cases, posts on social media forums may mislead subscribers by suggesting the activity is legal”.

Brokers warned to be alert for suspicious activity

The statement said that ASIC was monitoring social media activity that discusses market tips and stock ideas on platforms including Telegram, Reddit, Twitter and Facebook.

ASIC commissioner Cathie Armour said the regulator would take enforcement action where appropriate and was working closely with brokers to “identify and disrupt pump and dump campaigns”.’

She said brokers should take steps to identify and stop potential market misconduct and be aware of indications of manipulative trading.

“ASIC expects participants to promptly submit suspicious activity reports where they see this type of activity,” Ms Armour added.