WASHINGTON, D.C.—Benjamin Schiffrin, Director of Securities Policy, issued the following statement in connection with Better Markets’ new Report, “Unregulated Financial Influencers: Safeguarding Investors in the Digital Age.”
“When most people think of Kim Kardashian and Lindsay Lohan, they probably don’t think of them as purveyors of financial advice. But the SEC has sued both for promoting crypto investments without disclosing that they were paid to do so. And they are not alone in using their social media presence to influence financial decisions. There is now a whole army of individuals dispensing financial advice on social media. They are called ‘finfluencers.’
“As we detail in our new report, many retail investors are increasingly turning to finfluencers for financial advice. And the number of self-directed retail investors has exploded since the pandemic. This confluence of events means that more retail investors than ever before are participating in the securities markets at the same time as there are more potentially problematic sources of financial advice than ever before. That’s because finfluencers are largely unregulated. This means that they need not have any qualifications to provide investment advice, need not disclose if they are being paid for promoting specific products, and need not fear getting sued by regulators. So finfluencers may not offer quality advice, and the advice that they offer may be infused with conflicts of interest.
“The risks that finfluencers pose and the potentially harmful consequences to investors mean that regulators must pay greater attention to this space. For example, Logan Paul promoted investments which caused their prices to spike, only to subsequently crash. Rapper T.I. settled SEC charges that he helped promote a crypto investment which turned out to be fraudulent and in which investors lost $2.4 million. And investors are not only misled by celebrities but also by regular people who have gained a following by discussing investments on social media. The absence of rules for finfluencers is pernicious. Regulators must act to protect retail investors from the many risks finfluencers pose.”
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
