SEC Flags Risks in Crypto and Emerging Tech Investment Scams

October 8, 2024 Bitcoin.com

Crypto memes can be considered financial promotions, says UK watchdog

July 18, 2023 Coin Telegraph

britain

Memes found to be non-compliant with financial promotion rules could carry up to two years in jail under a proposal from the FCA.

Crypto firms and influencers may need to start slapping disclaimers on crypto memes to stay compliant with advertising laws in the United Kingdom, according to a new proposed guidance from the country's financial regulator.

On July 17, the Financial Conduct Authority (FCA) released a proposed guidance on social media financial promotions which targets promotional memes and financial influencers — “finfluencers.”

Too many people across the UK are being shown financial promotions from unsuitable sources.

We’ll be ramping up our work to stamp out illegal financial promotions, particularly those found on social media. #financialpromotions #financialservices https://t.co/sK8r5ExxVm
— Financial Conduct Authority (@TheFCA) July 17, 2023

The FCA said it’s seen memes from crypto firms circulated online which many don’t realize are subject to its promotional rules.

It said promotional memes are particularly prevalent in the crypto sector and added any type of communication could be considered a financial promotion.

*Example of a crypto investing-related meme the FCA considers a financial promotion. Source: FCA*

The FCA considers crypto a high-risk investment. It can be advertised to retail investors at large but there are requirements such as including risk warnings and a ban on investment incentives.

It said in Q4 2022, 69% of financial promotions on websites or social media from authorized firms were amended or withdrawn following FCA intervention.

It launched the consultation to update its guidance from 2015 and make clear its expectations on how marketers are to implement its regulations around promotions.

Finfluencers in the crosshairs

The FCA stated it’s seen an increase in the number of finance-oriented influencers promoting financial products they have little knowledge of, which typically target a younger audience.

It warned influencers their promotions could be an offense punishable by up to two years in jail, an unlimited fine or both. The law applies even to promotions from outside the U.K. which could have an effect in the country.

In its reasoning for the reminder, it cited a report that claimed over 60% of 18-to 29-year-olds follow social media influencers, with three-quarters saying they trust their advice.

A 2021 FCA survey found 58% of respondents under 40 years old cited hype from social media and the news as reasons for their investment in what the watchdog considers a high-risk product.

Public comments on the proposed guidance are open until Sep. 11.

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ASIC chair troubled by sheer amount of ‘risk-taking’ crypto investors

August 12, 2022 Coin Telegraph

Coin Telegraph

Australia's financial services regulator sees the rise in crypto investment during the COVID-19 pandemic as a cause for concern, especially among young and new investors.

The chief of Australia’s financial services regulator Joe Longo has raised the alarm over the sheer amount of people that invested in “unregulated, volatile” crypto assets during the pandemic.

Longo, chairman of the Australian Securities and Investments Commission (ASIC) made the comments in an Aug. 11 media release for its research conducted in November 2021, which looked into investment behavior following the onset of t COVID-19 pandemic, stating:

"We are concerned about the number of people surveyed who reported investing in unregulated, volatile crypto-asset products”

The survey found that crypto was the second most common investment product, with 44% of those surveyed reporting holding it. Of those investors, 25% indicated that crypto assets were the only investment class they were involved in.

Longo said the research highlights “the appeal of crypto-assets to the market,” but that investors may not know what risks they are taking on.

“According to the survey, only 20% of cryptocurrency owners considered their investment approach to be ‘risk-taking’, raising concerns that investors did not understand the risks of this asset class.”

He added that considering there are “limited protections” for investors, the lack of understanding among retail investors makes “a strong case for regulating crypto-assets to better protect investors.”

Opposition party Senator Andrew Bragg agreed with Longo that there is a need for more regulation and for lawmakers to act swiftly to protect investors. He told Cointelegraph:

“The Chair is right to identify this as an issue [...] As the Senate Inquiry’s Chair I recommended sweeping reforms to regulate crypto. The government should do some work and do it quickly.”

Australian digital assets lawyer Joni Pirovich however told Cointelegraph that there’s been confusion about whether ASIC is properly equipped to oversee token issuers and their tokens. She said:

“It is not that tokens are unregulated, rather that there is a grey area about whether the token issuers are effectively regulated and supervised by regulators such as ASIC.”

Pirovich, who is the principal at Blockchain & Digital Assets - Services + Law, noted that in Australia, token issuance and trading creates an interesting conundrum for policymakers because once tokens are issued and then traded on the open market, it becomes a matter for crypto exchanges:

“There is room for token exchanges to mature and develop best practice standards to better inform their customers too and policy reform should not stifle this.”

The ASIC chair remarks come while crypto trading is still not yet fully regulated in Australia, causing some industry groups to bump heads with representatives at ASIC earlier this year.

The Australian Securities and Investments Commission (ASIC) oversees financial activity in Australia and has assumed regulatory oversight over cryptocurrency investments in the country.

The ASIC survey gathered its data from 1,053 Australian adults at least 18 years old who traded securities, derivatives, or crypto between March 2020 and Nov. 2021.

Aussie crypto ‘finfluencers’ face tough new legal restrictions

April 4, 2022 Coin Telegraph

Coin Telegraph

The Australian securities regulator is taking a stand against financial influencers whom they believe to be bamboozling the general public with misinformation about crypto.

New warnings from the Australian Securities and Investments Commission (ASIC) on appropriate conduct for financial influencers could have a dramatic impact on the local crypto industry.

ASIC’s recent Information Sheet outlines the traps influencers and the companies that hire them could fall into while wittingly or unwittingly promoting financial products. The penalties for failing to heed ASIC’s warnings could lead to millions of dollars in fines for corporations and up to five years in prison for individuals.

Although it does not specifically mention crypto influencers, the guidelines certainly apply to them as cryptocurrency investing services are seen as financial products. To those financial influencers or ‘finfluencers’ who are not sure whether their brand is in violation of the law, ASIC writes “Think about your content carefully and whether you are providing unlicensed financial services.”

One point of confusion in the new rules concerns exactly what constitutes promotion as opposed to innocuous informing of financial products. Financial blogger from Strong Money Dave Gow wrote on March 29 that “Writing almost anything could influence someone to invest or use any financial product.”

Gow’s assessment is based on the somewhat nebulous distinction ASIC has made between objective facts about a financial product and the way in which influencers may present them. It states:

“If you present factual information in a way that conveys a recommendation that someone should (or should not) invest in that product or class of products, you could breach the law by providing unlicensed financial product advice.”

Australian Liberal Senator Andrew Bragg believes there is an incongruence between the new ASIC guidelines and how crypto is regulated in his country. He believes that under current laws, the crypto industry should be exempted from these new restrictions. He told Cointelegraph in an email:

“ASIC’s current policy applies the law to crypto to the extent that digital assets fall within the definition of a financial product. Crypto is currently unregulated and not a financial product… I believe we can do more.”

Senator Bragg is a proponent of clearer crypto regulations, and recently introduced an ambitious new proposal concerning decentralized autonomous organizations (DAO) at Australia Blockchain Week last month.

As someone who may now be considered an unlicensed finfluencer, Gow takes exception to restrictions on what they now may not do, which is make any sort of recommendation. He added that the rule limits influencers to simply “parroting what you can read elsewhere” and harms the investor knowledge base. He stated, "How does that help you wade through the sea of information and nonsense out there?”

Modify old content / minimise investing discussion / not mention any financial products, funds etc.

Some may choose to close up shop, I know one who is, while others will prob continue for enjoyment in a limited capacity.

Sad situation for free speech.
— Dave Gow | Strong Money Australia (@strongmoneyaus) April 2, 2022

As part of Australia’s Corporations Act, individual influencers must beware of how they promote financial products, while corporations must also keep a close watch on their hired influencers to ensure no rules are broken. The commission offers several case studies that provide context that could help identify whether an individual or company is promoting financial services.

Finfluencers

Finfluencers in the crosshairs

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