SCC Cautions Virginians About Social Media "Finfluencers” Providing Financial Advice

RICHMOND – Fueled by rising interest in investing, reliance on apps and social media for investing information is replacing more traditional sources of such information, such as brokerage or investment advisory firms. Increasingly, Virginians rely on social media to find investment advice and connect with financial advisors.

This trend has introduced financial influencers or “finfluencers” – celebrities or other well-known online personalities who use social media (such as Twitter, YouTube, TikTok, Facebook or other sites) – to promote investment opportunities or offer financial advice. These finfluencers may or may not have a background in the financial services industry, and sometimes receive compensation by the business offering the investment, the social media platform on which the message appears, or some other undisclosed source with an interest in the promoted investment or financial service.

“When it comes to investing, there is no one-size-fits-all approach. Instead, individuals should consider whether an investment fits their particular needs,” said Ron Thomas, director of the State Corporation Commission’s (SCC) Division of Securities and Retail Franchising (Division). Thomas encourages Virginians to review financial opportunities on social media carefully and investigate them thoroughly. “Understand the risks and benefits of any investment and never invest more than you can afford to lose,” he said.

The financial services industry is highly regulated, with strict rules about statements concerning an investment’s performance and disclosures regarding compensation and potential conflicts of interest. Investment promoters typically must provide potential investors with all information relevant to making an informed investment decision.

Thomas offers the following tips:

• Consider investment opportunities or advice from finfluencers with caution and independently conduct your own due diligence before investing or taking advice.
• Be wary of content on social media or elsewhere promoting investment opportunities with big or guaranteed returns with little or no risk. If it sounds too good to be true, it probably is.
• As part of your due diligence, independently verify who is offering an investment and the details of any offers. Keep in mind that individuals offering investments are obligated to disclose all material facts regarding an investment, and they must disclose the risks associated with each product.
• Make sure any investment and the person offering it are properly registered. In Virginia, contact the Division at 804-371-9051 or toll-free at 1-800-552-7945, or email SRF_General@scc.virginia.gov.

For more information, visit the Division’s website at scc.virginia.gov/pages/Consumer-Investments or the NASAA website at nasaa.org/64940/informed-investor-advisory-finfluencers/?qoid=investor-advisories.

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Contact: Katha Treanor, 804-371-9141