Rethinking the Regulation of Financial Influencers

in Goanta, Catalina (Ed.) Social Media Contracts – The Quest for Fairness and the Need for Reform (2023)

The growth of social media has led to an unprecedented rise in financial influencers, so- called finfluencers, who share investment ideas and opinions with a global audience. Finfluencers have various ... [more ▼]

The growth of social media has led to an unprecedented rise in financial influencers, so- called finfluencers, who share investment ideas and opinions with a global audience. Finfluencers have various business models, from endorsing products to advertising their mutual funds. Retail investors are particularly vulnerable to the risks posed by financial influencers because most lack financial literacy, according to a UK Financial Conduct Authority study from 2021. Additionally, the power dynamic inherent in the influencer- follower relationship can also increase consumers’ susceptibility, particularly through one- sided parasocial relationships. Parasocial relationships are one-sided relationships where one person extends emotional energy and interest towards the financial influencer, who may be completely unaware of the follower’s existence. Such relationships can lead to a higher level of trust, credibility, and reliance on the advice and recommendations of financial influencers, even if they are not qualified or licensed to provide financial advice. This can be particularly dangerous for retail investors with low levels of financial literacy, who may be more vulnerable to the risks posed by finfluencers. Thus, the current regulatory framework may not be adequate to protect consumers from the potential harms of financial influencers. This Article starts by briefly examining the current regulatory framework for financial influencers (based on Pflücke 2020 and 2022), including how the EU and five platforms govern it. It then proceeds by critically analysing and proposing targeted and actionable policy considerations to increase fairness and transparency on social media platforms. The Article argues that the current approach is neither evidence-based nor tailored to the activities and potential harms of financial influencers, requiring radical reforms to protect consumers and capital markets. [less ▲]

The Limits of Consumer Law in Pursing Sustainability

in Nowag, Julian (Ed.) Research Handbook on Sustainability and Competition Law (2023)

This Chapter critically examines the limits of consumer law in pursuing sustainability. It uses the case of consumer sales of goods contracts, commercial communications and other marketing practices, and ... [more ▼]

This Chapter critically examines the limits of consumer law in pursuing sustainability. It uses the case of consumer sales of goods contracts, commercial communications and other marketing practices, and financial products and services to depict the potential and limitations of the current and proposed measures. The Chapter demonstrates that some consumer law provisions contradict consumer theories and scientific studies and provides targeted and actionable policy recommendations to address these deficiencies. [less ▲]

Regulating Finfluencers

in Journal of European Consumer and Market Law (2022), 11(6)

The accessibility of investment advice on social media platforms has significantly increased in recent years. Finance influencers and content creators, so-called ‘Finfluencers’, provide their audience ... [more ▼]

The accessibility of investment advice on social media platforms has significantly increased in recent years. Finance influencers and content creators, so-called ‘Finfluencers’, provide their audience with unpaid or paid financial advice on social media, featuring investment strategies relating to meme stocks, contracts for difference trading, or cryptocurrencies. This article examines the practices and business models of Finfluencers as well as how EU law, three national jurisdictions (Luxembourg, Germany, and the UK), and five platforms regulate their activities. The underlying objectives are to understand the activities and regulation of Finfluencers and critically analyse whether the current framework sufficiently protects consumers. [less ▲]

Making influencers honest: the role of social media platforms in regulating disclosures

in Ranchordas, Sofia; Goanta, Catalina (Eds.) The Regulation of Social Media Influencers (2020)

This chapter examines the rules applicable to influencer marketing, and whether the five selected social media platforms (YouTube, Facebook, Instagram, Snapchat, and Pinterest) themselves comply with the ... [more ▼]

This chapter examines the rules applicable to influencer marketing, and whether the five selected social media platforms (YouTube, Facebook, Instagram, Snapchat, and Pinterest) themselves comply with the relevant legal obligations. The first part elucidates the laws governing hidden marketing in Germany and the United Kingdom, in particular the implementing laws and associated case law under the Unfair Commercial Practices Directive. It then compares and assesses the platforms’ standard terms by deploying an empirical legal approach, namely content analysis. It is revealed that some platforms comply almost entirely with the determined rules, while others do not address disclosures at all. The chapter argues that platform governance through private regulation is suitable to address some of the concerns of hidden influencer marketing, but that a multifaceted approach is necessary, building upon the wealth of policy options considered by European and national regulators. [less ▲]