00940 fined 900,000 for misleading influencer marketing, KOLs also required to have professional certifications

In March, retail investors rushed to subscribe for the overseas ETFs 00939 and 00940, which gained popularity but were fined by the Financial Supervisory Commission due to excessive promotion by internet celebrities. Additionally, according to the latest regulations, internet influencers (KOLs) not only need to have a clean record, but also must possess qualifications such as a securities analyst certificate or a passing score on the registered representative exam.

Bloomberg Bitcoin ETF analyst comments on the frenzy surrounding Taiwan's 00939 and 00940: "Can't believe it's real."

00940 Fined for Misleading "Capital Protection" or "Guaranteed Profit" Claims

According to a report from Commercial Times, Yuanta Securities Investment Trust was fined 900,000 and Fubon Securities Investment Trust was fined 600,000 for violations under the Securities and Exchange Act.

The Financial Supervisory Commission's ruling stated that promotional materials, official websites, social media posts, and influencer videos related to Yuanta Taiwan High Dividend ETF 00940 and Fubon Taiwan High Dividend Momentum ETF 00939 contained misleading information suggesting safety of principal or guaranteed profits. For example, the Yuanta Taiwan High Dividend ETF 00940 promotion used phrases like "Happiness is getting your interest" as a headline, and claimed "monthly dividends," with expressions such as "Passive income is not a dream, give yourself a raise every month," emphasizing fixed dividends multiple times. The warning text displayed was not proportional to the aforementioned advertising claims.

The Financial Supervisory Commission pointed out that Yuanta Securities collaborated with a YouTuber influencer, and the video content included statements like "Invest 2 million in principal and receive 14,333 monthly interest. With such a stable return rate, you can amplify your retirement savings and passive income," and "Start saving 2 units of 00940 monthly at age 30, accumulate to 720 units by age 60, and receive about 51,600 monthly dividends. P.S. The dividend yield is 8.6%," emphasizing fixed dividend income and increasing personal retirement savings.

The Financial Supervisory Commission determined that the advertising and marketing activities of 00940 misled investors into believing in the safety of their principal or guaranteed profits, thereby violating regulations on investment trust management and financial services advertising activities. As a result, a fine of 600,000 was imposed. Additionally, using monthly dividends as the main advertising or sales appeal for stock-type ETFs also violated industry advertising norms and financial services advertising regulations, resulting in a fine of 300,000, totaling 900,000 in penalties.

Financial Supervisory Commission Regulates Influencer Qualifications

In response to the high concentration of Taiwan ETFs and the numerous controversies surrounding influencer marketing, the Financial Supervisory Commission issued regulations on ETF concentration management and influencer management at the end of April. It mandates that in the future, when fund companies engage influencers for endorsements, they must require them to sign a declaration of compliance with self-regulatory norms. If an influencer violates the agreement after signing with the company, the company will be penalized. In other words, the company will be held accountable for the influencer's actions, with penalties ranging from warnings to the most severe measure of revoking business licenses; fines could also be imposed, ranging from 600,000 to 3 million.

According to the regulations published by the Securities Investment Trust and Consulting Association of the Republic of China on "Norms for Members and their Sales Institutions Engaging in Advertising and Business Activities" on May 17 this year, influencer qualifications are strictly defined:

• Influencers should provide relevant documents proving they have not engaged in fraud, coercion, or other improper behaviors, such as a certificate of good conduct, and the company should confirm that the influencer has not engaged in inappropriate behavior such as guaranteeing profits, excessive promotion, biased dissemination, or spreading false information in the three months prior to the cooperation in advertising and fund marketing activities.
• Confirm that the influencer meets one of the qualifications listed in Article 6-1, paragraphs 1 to 3 of the Rules for the Qualification of Responsible Persons and Business Personnel of Securities Investment Trust Enterprises, namely, holding a certificate of qualification as a securities investment analyst, a passing certificate for the examination of salespersons of securities investment trust and consulting businesses, or a senior salesperson certificate of securities firms.

While the violation by influencers results in penalties for the companies, it significantly restricts the qualifications of influencers, requiring professional certification for future endorsements!