“Finfluencer” hit by Federal Court finding
The Australian Securities and Investments Commission (ASIC) has broken new ground with the successful prosecution of a “finfluencer” Tyson Scholz.
The regulator announced today that the Federal Court had found social media “finfluencer” Tyson Robert Scholz contravened the Corporations Act by carrying on a financial services business without an Australian Financial Services License (AFSL).
ASIC had alleged Mr Scholz was carrying on a financial services business by providing financial product advice, regarding share trading on the ASX, without a licence by:
- delivering training courses and seminars about trading in ASX-listed securities during which he made recommendations about share purchases
- promoting those courses and seminars on Twitter and Instagram using the handle ‘@ASXWOLF_TS’
- making share purchase recommendations on private online forums (that he administered) and on Instagram.
Commenting on the Federal Court decision, ASIC Deputy Chair Sarah Court said, “ASIC has warned those who discuss financial products and services on social media that they could be the subject of enforcement action if they are carrying on a business of providing financial services without a licence.
“Financial services laws exist to protect investors if something goes wrong. The individuals who paid Mr Scholz for his tips, to attend seminars or access private online forums, as well as those individuals who purchased shares based on his recommendations or statements of opinion, did not have the benefit of these protections.”
Scholz’s business to paying subscribers included:
- subscription/membership fees of $500, $1,000 or $1,500
- offers of various levels of share trading training, referred to as ‘Stage 1’, and ‘Stage 3’ packages, which were marketed as introductory or advanced seminars
- offers of individual one-off share trading suggestions, or tips for a fee
- the Stage 2 package providing one year’s access to a private chat site, named ‘Black Wolf Pit’, using the online communications platform Discord.
The matter will be listed for a case management hearing on 31 January 2023 to progress to a further hearing to determine remaining issues including any orders restraining Mr Scholz from carrying on a financial services business without a licence.
ASIC is seeking orders that Mr Scholz be prohibited from:
- promoting or carrying on the business of providing recommendations or statements of opinions about the purchase of shares in return for payments of money or other benefits
- directly or indirectly carrying on any financial services business in Australia
- receiving, soliciting, transferring or disposing of customer funds received in connection to providing recommendations or opinions about the purchase of shares.
In handing down judgment, her Honour Justice Downes said, “…the financial product advice given by Mr Scholz formed an integral part of this business. The advice which was given by him was not a one off but formed part of the continuous and systemic business operations by which Mr Scholz derived profit.
“…through his lifestyle posts and ‘life story’ posts on the Instagram account, Mr Scholz had established a reputation as a successful share trader who had the ability to identify worthwhile companies in which an investment should be made. It did not matter that the stories did not contain any overt recommendation to acquire the shares: it was enough that Mr Scholz referred to a company or its share in the stories, which was usually done in a way which indicated that he liked that company.”
Let’s say there’s a book which is published and the author mentions a financial product in that book. (Managed investment, super fund, whatever).
Although the author might not derive profit from the for mentioning a financial product, nor does the author charge a subscription directly from the reader to read their book, it is however likely that income is receivable to the author from sales of their book.
Would this constitute the provision of unlicensed advice given that consumers aren’t afforded legal protections?
Is a mere disclaimer or general advice warning enough?
Is the benefit of financial gain to the author from the sale of the book meaningful to the consideration?
This bit from above seems interesting;
“It did not matter that the stories did not contain any overt recommendation to acquire the shares: it was enough that Mr Scholz referred to a company or its share in the stories, which was usually done in a way which indicated that he liked that company.”
So what happens when an explicit reference is made within a book, the sale of the book provides the author a financial benefit and the author has reputation and projection of being successful? Would such an author potentially be in breach?
Thoughts anyone?
ABSOLUTELY !!!!!
“…done in a way which indicated that he liked that company.” So it’s wrong to ‘indicate’ a company you like but completely ok to recommend a fund. And people wonder why the industry is in a mess.
Nothing happens, as the book sells Industry Super Funds and Real Advisers all should know by now the Industry Funds will never be charged with anything from best buddies ASIC. And neither will any finfluencer promoting Industry Super.
Include the idiot from bare foot investor with his misleading advice and we’re getting somewhere!