Finfluencer failed to disclose paid promotions, says regulator

Days after research from the Ontario regulator found those who make financial decisions based on finfluencers' recommendations are 12 times more likely to be scammed, a Canadian finfluencer was busted for failing to disclose sponsorship of content and engaging in investor relations activities.

The Alberta Securities Commission (ASC) found James Floreani, who runs Jayconomics, breached the local Securities Act when he engaged in investor relations activities for four separate product issuers via his social media content.

Jayconomics has more than 50,000 YouTube subscribers and about 2000 Instagram followers. He also uses X and produces educational investing content on Patreon.

The allegations first arose in early 2024, with the Alberta regulator saying Floreani was paid by four product issuers to produce favourable content and had promoted securities issued by them. He failed to disclose the payments and engaged in investor relations on behalf of those companies, as defined by the Securities Act.

"Floreani presented himself as knowledgeable and sophisticated in finance and investment, demonstrating familiarity and competence with the relevant terminology," the ASC said.

"In reality, Floreani did not have any formal education in finance or investing. He made recommendations about purchasing certain securities to members of his audience, and the public comments on the Respondents' posts demonstrated that viewers were acting on those recommendations."

Floreani will now attend a second hearing by the ASC to determine sanctions and/or cost recovery, the regulator noted.

The Ontario Securities Commission (OSC) recently surveyed 655 Canadian retail investors and found that 35% had made a financial decision based on advice from a finfluencer.

While respondents largely agreed that finfluencers are motivated by self-interest, about 40% believe they can trust the finfluencers they follow.

However, the research also found that those who made financial decisions on the back of finfluencer recommendations were 12 times more likely to have been scammed on social media. The OSC said this suggests "those who trust and follow the advice of finfluencers may be more vulnerable to social media scams."

As part of the research, the OSC conducted an online experiment with 1465 social media users, some of which were investors, to assess the impact of finfluencers. Participants were exposed to a variety of posts promoting a particular asset during an online trading simulation, all designed to resemble Reddit, X, and YouTube posts.

Close to 40% of those exposed to the posts purchased the promoted assets, compared to just 10% of those who weren't. It also found that non-investors were more likely to be influenced.