South Africa’s Financial Sector Conduct Authority (FSCA) is preparing to take action against social media influencers offering financial advice, possibly requiring them to comply with the same rules that apply to licensed financial advisors.
The regulator, who classified crypto assets as financial products in 2022, has recently released the final version of its guidelines for financial education (FE) initiatives.
South Africa’s
Financial Regulator, FSCA, Declares Crypto Assets as a Financial Product
A crypto asset is used as an investment vehicle… and it resembles a financial product – you invest in it, you get returns from it.” – FSCAhttps://t.co/FOAe4pMmy3
— BitKE (@BitcoinKE) October 21, 2022
The regulations are designed to ensure that financial education remains relevant, unbiased, and not used as a vehicle to promote specific financial products. They respond to growing concerns that some organizations were using educational content as a cover for marketing.
If you recall, in December 2024, Nigeria’s SEC announced a similar move, releasing several requirements for influencers, notably that crypto influencers will be required to disclose to their community when they are paid to promote a digital asset or service.
REGULATION | Influencers in Nigeria Must Promote Only Licensed Crypto Firms, Says Revised @SECNigeria Regulations
Failure to comply could result in a fine of N10 million Naira (~$6,500) and a prison sentence of up to 3 years.https://t.co/KOQb0JUu1Q pic.twitter.com/bjRRBivvRl
— BitKE (@BitcoinKE) December 23, 2024
For Africa’s most advanced crypto jurisdiction, the FSCA reveals it has begun paying close attention to the rise of social media influencers – individuals with large online followings – entering the financial advice space.
The rise of cryptocurrency in the country has been accompanied by a number of scams, often driven by individuals making bold public claims to attract unsuspecting consumers. One such example is Neil Leon De Waal, who promoted a controversial scheme known as Gold Standard Partners.
The company had been luring investors with promises of returns as high as 22% a week.
If you invested R1,000 ($52.86) initially and simply left it invested for a year, that would work… pic.twitter.com/KoF6PcxDOx
— BitKE (@BitcoinKE) June 11, 2024
“This has inevitably led to the rise of finfluencers, referring to persons who post financial and investment-related content, and sometimes specifically promote financial products through social media,” the FSCA said in its 2024 Regulatory Actions report.
Q&A | What FSCA Licensing for Crypto Assets Service Providers Means for South Africa – A Chat with #Binance Compliance
Below is the Q&A with Samukele Mkhize, Country Compliance Head/MLRO South Africa for Binance, regarding the FSCA’s licensing of crypto asset service providers… pic.twitter.com/qL62Gz8HE9
— BitKE (@BitcoinKE) April 25, 2024
The FSCA acknowledged that, in certain cases, finfluencers have made a positive impact by improving public financial literacy and encouraging greater participation in financial markets.
“However, it raises concern if the public is influenced in their financial decisions by social media and the advice of celebrities, rather than by recommendations of authorised financial advisers,” said the FSCA.
“The FSCA has seen evidence of finfluencers conveying misinformation and perpetuating scams through social media [which] presents a clear risk to the public,” they added.
Consequently, FSCA announced its intention to closely observe the influence of finfluencers and, when necessary, intervene to protect financial consumers from possible risks.
“This is a wonderful example of an industry that sees the harm that could be done in its name and steps up to self-regulate the issues without being forced to do so by government,” said CEO, South Africa Advertising Regulatory Boardhttps://t.co/xtSz7Jb3fu
— BitKE (@BitcoinKE) January 27, 2023
Gerhard van Deventer, FSCA’s Divisional Executive for Enforcement, said that the authority is evaluating the role of finfluencers and how they align with its existing regulatory framework.
“It should be noted that any person that provides financial advice with reference to a financial product as defined requires authorisation by the FSCA.” Says Gerhard
Providing such advice without authorisation is a contravention of the FAIS Act. Depending on the facts of each case, it may be that the activity of a finfluencer falls within the ambit of the prohibition,” he added.
Depending on the circumstances, a finfluencer’s actions could potentially breach existing financial regulations. The FSCA has made it clear that it will investigate any complaints related to such conduct and, where warranted, impose enforcement measures.
This initiative forms part of a broader effort to protect consumers from misleading or uninformed financial guidance. While licensed financial advisors operate under strict regulatory scrutiny, many in the industry have raised concerns that finfluencers appear to offer advice with little to no accountability.
The FSCA has reiterated that it is actively assessing how finfluencers should be incorporated into its regulatory framework to ensure a consistent and fair approach across the financial services landscape.
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