According to ESMA, advertising on social media could breach EU rules against financial market abuse.
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Influencers who promote financial products on social media were warned today (February 6) by EU financial regulators that they could face millions in fines or criminal prosecution.
EU rules against financial market abuse require investment recommendations to be accompanied by warnings and caveats – but lawmakers are struggling to adapt their rules to the digital age.
“If you are a financial influencer, a technical expert or someone simply interested in financial investing, you need to know the rules,” the European Securities and Markets Authority said in a statement.
Financial influencers, also known as finfluencers, must separate facts from opinions and disclose their own interest in what they are selling – even if the advice is not technical or indirect in nature, the statement continued.
Failure to comply with or trade on inside information can result in fines of up to €5 million or criminal sanctions, ESMA said.
EU market abuse rules aim to protect investors from scams such as pump-and-dump schemes, in which a security is promoted to inflate its price before organizers sell it.
But social media-driven trading has often caught financial markets by surprise – such as in 2021's “meme stocks” episode, when discussions on the Reddit website drove up the price of stocks like GameStop.
Last year, France passed a new law targeting online influencers who can have millions of followers on sites like X and Instagram – and restricting the promotion of risky products such as tobacco, cosmetic surgery and cryptocurrency.
Britain's Financial Conduct Authority said last year it had worked with Big Tech firms to block thousands of unauthorized financial advertisements.
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