Court finds finfluencer contravened law with financial product advice
A finfluencer has been found by the Federal Court to have contravened the Corporations Act by providing financial product advice without an Australian financial services licence.
Tyson Robert Scholz carried out a financial services business between March 2020 and November 2021 which provided financial product advice regarding ASX share trading without a licence.
This included:
- 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’; and
- Making share purchase recommendations on private online forums (that he administered) and on Instagram.
He also offered paid subscribers:
- 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; and
- The Stage 2 package providing one year’s access to a private chat site, named ‘Black Wolf Pit’, using the online communications platform Discord.
In light of this, ASIC was seeking orders that Scholz was 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; and
- 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: “...through his lifestyle posts and ‘life story’ posts on the Instagram account, 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.”
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 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.”
The matter would 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 Scholz from carrying on a financial services business without a licence.
AUTHOR
Laura Dew
Recommended for you
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
Responsible investment performance concerns have lessened as the market hits $1.6 trillion in AUM, according to RIAA’s annual report, but greenwashing fears among asset managers are on the rise.
Research by Morningstar has found fixed income funds are bucking a general trend around managed fund fee dispersion with a smaller fee dispersion compared to equity ones.
As investors seek to diversify their portfolios, the naming of bond labels has broadened out to include green, social and impact bonds, according to the annual RIAA report.
It's good that ASIC is cracking down on these finfluencers. There are so many of them that are not appropriately qualified and not licensed or authorised to provide general advice. But even for those who are, there are also issues with them being directly paid by product issuers (or indirectly via interposed platforms) which in many instances would be deemed to be conflicted remuneration. More work to be done.
Can someone tell me why characters like this don't serve a gaol sentence to deter others from doing this whilst true investment advisers/professionals are subject to extreme scrutiny and compliance measures through over-regulation.
Despite the regulated requirements for those on the FAR, the likes of Caddick etc seem to spring up like mushrooms in spite government rules that require others who have gone through the process to provide professional advice.
You have to wonder what ASIC were doing between March 2020 and November 2021 !
Ok. How about selling a book containing explicit recommendations to become a member of a public offer superannuation fund? Might also add some pretty specific ideas on personal risk protection that come off as one size fits all. Is it more harmful that I have an AFSL.. or I should I ditch that for the book release? asking for a friend