Social media promotions may breach EU rules against financial-market abuse, ESMA said.
ADVERTISEMENTInfluencers promoting financial products on social media were today (6 February) warned by EU finance watchdogs they could face million-euro fines or prosecution.
EU rules against financial market abuse require investment advice to come with warnings and caveats – but legislators are struggling to update their rules for a digital age.
“If you are a finance influencer, a technical expert, or someone with just interest in financial investments, you need to be aware of the rules,” said a statement by the European Securities and Markets Authority.
Financial influencers, also known as finfluencers, need to separate fact from opinion, and disclose their own interest in what they’re selling – even if the advice is non-technical or indirect, the statement added.
Failure to comply or trading on insider information can lead to fines of up to €5m, or criminal sanctions, ESMA said.
EU market abuse rules aim to protect investors from scams such as pump-and-dump schemes – where a security is promoted to push up its price before the organisers sell.
But social media-driven trading has often taken financial markets by surprise – such as in the 2021 “meme stock” episode when discussions on the Reddit site massively inflated the price of stocks like GameStop.
Last year, France passed a new law targeting online influencers who can have millions of followers on sites such as X and Instagram – limiting promotions of risky products like tobacco, cosmetic surgery and cryptocurrency.
The UK’s markets watchdog the Financial Conduct Authority last year said it had worked with Big Tech firms to block thousands of unauthorised financial promotions.
