The FCA’s Finfluencer Crackdown: A Necessary Step Towards Market Integrity

UK watchdog calls on Big Tech to step up as social media scams proliferate

The UK's Financial Conduct Authority (FCA) has intensified its crackdown on “finfluencers” — social media personalities promoting unauthorised financial schemes — in a bid to stem the tide of retail investor exploitation. In 2024 alone, the FCA received 25,000 reports concerning unauthorised businesses, highlighting just how embedded the problem has become.

Lucy Castledine, Director of Consumer Investments at the FCA, described the situation as a "whack-a-mole" battle, where content removed from one account swiftly reappears on another. This loophole is enabled by the algorithmic structures of social platforms that promote viral content — irrespective of its regulatory status — based on user engagement, not compliance.

Some of the most notorious recent offenders include former reality TV stars promoting trading schemes to a combined audience of 4.5 million. Despite clear breaches, convictions remain elusive. The FCA has proposed increasing the maximum prison sentence from two to five years under the Financial Services and Markets Act 2000 to better deter repeat offenders.

MY ANALYSIS: The Real Risk Behind the Finfluencer Frenzy

This trend reveals a dangerous misallocation of capital and knowledge within retail finance. From an investment banking and private equity lens, such unchecked influence threatens market integrity in several ways:

• Capital Misallocation: Retail investors misled by pseudoscientific trading strategies or "get-rich-quick" crypto and forex schemes often divert funds from regulated instruments. This distorts real capital flows and undermines genuine investment opportunities.

• Regulatory Arbitrage: The failure of Big Tech to impose meaningful guardrails creates an uneven playing field where authorised advisors compete with unregulated actors operating at scale.

• Reputational Risk: As more people experience losses tied to unregulated advice, public confidence in the broader financial system is at risk — a serious long-term threat to market participation and investor inclusivity.

A particularly concerning statistic is that 62% of UK 18–29-year-olds follow influencers, and among them, 74% trust the advice given. Financial literacy gaps here are not just educational; they are structural vulnerabilities in the digital age.

In my view, the FCA is right to escalate its stance — but enforcement must be complemented by three pillars:

1. Platform Accountability: Big Tech needs to treat financial misinformation with the same severity as health or election-related disinformation.

2. Algorithmic Regulation: Algorithms that amplify harmful financial content should be subject to audit and oversight.

3. Digital Financial Education: There is a window of opportunity to embed investor protection within education policy — both in schools and online ecosystem