A social media ‘finfluencer’ with almost 21,000 followers on Instagram has been found to have breached laws relating to financial advice after he was taken to court by the corporate regulator.
The Brisbane federal court found share trader Tyson Scholz, who’s name on Instagram includes ‘ASX Wolf’, was found to have breached the law by running a financial service business between March 2020 and November 2021 without a licence.
The Gold Coast resident’s use of Instagram, seminars and social media service Discord were examined by the court.
The Australian Securities and Investments Commission launched the civil case and alleged that Scholz’s business charged subscribers membership fees of $500, $1000 and $1500.
It also alleged he offered various levels of share trading training, referred to as ‘Stage 1’, and ‘Stage 3’ packages, which were marketed as introductory or advanced seminars and offers of individual one-off share trading suggestions or tips for a fee.
He also allegedly offered a Stage 2 package providing one year’s access to a private chat site, named ‘Black Wolf Pit’, using Discord.
Justice Kylie 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,” she said.
Justice Downes added that through his lifestyle posts and ‘life story’ posts on Instagram, “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,” she said.
ASIC deputy chair Sarah Court said the corporate regulator had 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,” she said.
“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.”
New guidelines introduced in April restrict unlicensed finfluencers from talking about stocks, investment funds or financial products and if broken they could face up to five years in jail or fines of over $1 million.
An ASIC survey found that almost 41 per cent of investors had sourced information from social media and networking platforms, including YouTube, Facebook, podcasts and finfluencers.
Scholz did not respond to an attempt to contact him but has defended the civil action and denied he was running a financial services business that required a licence.
No penalties have yet been handed down with the case due to return on January 31 next year to hear remaining matters including costs and any orders ASIC is seeking, including to restrain Scholz from carrying on a financial services business.