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The SEC Looks for More Transparency in Influencer Marketing

The SEC’s Office of Investor Education and Advocacy warns investors to be skeptical of endorsements from famous influencers marketing new investment opportunities.

Last week the SEC’s Office of Investor Education and Advocacy (@SEC_Investor_Ed) tweeted “It’s never a good idea to invest in something just because someone famous says it’s a good investment.”

Coincidentally during the same week, The Wall Street Journal reported, in an article about investments in influencer marketing, that brands have increasingly turned to influencers – people with some level of social-media following – to help them reach consumers in social media. An executive at Unilever PLC was quoted in the article, saying “We very much love working with influencers because, as you know, they’re very influential in driving consumer opinion.”

Unilever executives indicated that they believe “consumers listen to influencers in a way they no longer do to marketers speaking for themselves.”

The SEC’s concern with famous influencers providing investment advice is that they are not registered investment professionals and are frequently merely paid promoters, distinguishing this situation from famous influencers that endorse breakfast cereals, automobiles and other consumer brands. Given their outsized influence, famous influencers are targets who may be lured unknowingly into participating in unlawful and fraudulent investment opportunities. Last year, a well-known former professional boxer and music producer were charged with unlawfully touting investments in initial coin offerings on their social media accounts without disclosing they were paid promoters.

Worse, there is a danger that famous influencers may never have consented to the use of their name and image posted to social media platforms (being the victim of a computer-generated “deepfake” or other misleading activity) so that they may have never endorsed the investment opportunity.

As with any purchase, the SEC’s message is familiar – “caveat emptor.”

Spencer Feldman

Spencer G. Feldman is a securities and capital markets lawyer widely known for his experience in registered securities offerings and media and technology transactions.

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