Kim Kardashian\’s brush with the law via the SEC case has been a wake-up call for influencers and others in the social media endorsement space that has been a long time coming.
When the Securities and Exchange Commission took their $1.26 million action against Kardashian for her endorsement actions, they also unveiled new moves regarding celebrities and influencers who endorse investment advice with SEC Chair Gary Gensler saying that a celebrity endorsement of an investment product did not make it necessarily right for investors, or even legitimate.
The SEC’s case against Kardashian accused her of promoting the cryptocurrency EthereumMax in an Instagram post without disclosing to her population of social media followers of a $250,000 payment she received for the ad.
Kardashian’s 225 million Instagram followers provide a rich source of business for investment and other service providers and the move against her, as one of the leading lights in the social media space, is expected to put both celebrities and companies on edge about similar endorsement deals, lawyers said.
The action “heightens everyone’s awareness about the disclosures” said Sarah Krissoff, a partner at Day Pitney.
The new marketing rules come into force on November 4 and will be something that celebrities will need to take considerable care of before rushing to endorse various investment opportunities, like Kim Kardashian\’s efforts.
The new SEC rule on social media endorsements is mainly aimed at client reviews and similar, smaller promotions, but it covers the proliferation of social media platforms, blogs and podcasts. The ability to run high profile ads that are permitted, so long as there is proper disclosure to clients.
The SEC\’s main function is to protect investors and previously investment advisers were unable to use endorsements or testimonials to market their materials. The disclosure rules now permit that activity.
