The corporate regulator has echoed recent government comments that investors should use their own judgement when it comes to financial advice on social media, conceding the scale of the digital world makes it difficult for ASIC to police.
Addressing the Millennial-targeted MarketLit Investment Conference on Friday, ASIC senior manager of retail complex products and investor protection, Somer Taylor, said the ecosystem of financial influencers online was “ever evolving” and presented challenges for the regulator.
“There’s a fragmented nature when we’re talking about social media and the internet, there’s the scale of information that we have to monitor, there’s ease of access to that information and the rapid churn rate – these are all factors that make it a complex environment for us,” Ms Taylor said.
She added that social media could be an appropriate source of “background information” for younger investors, but that it presented “a degree of risk” if financial influencers were being relied upon for investment advice.
“Use your judgement and think about risks like the fact that advice on social media may not be licensed, you might be getting information on something that is inaccurate,” Ms Taylor said.
“Those providing it might have interests in the advice, they might be promoting a certain product so that’s something to bear in mind.
“We’re seeing a range of trading structures being targeted at [the Millennial] demographic, so we would encourage people to ... take the time to understand what the product is, what its risk profile looks like and what it means for you and your risk tolerance within that.”
Following the volatility caused by the GameStop trading saga in the US earlier in 2021, Ms Taylor said ASIC was paying particular attention to financial influencers’ involvement in “pump and dump activity” in markets, as well as monitoring for unlicensed advice and deceptive statements as part of social media promotions.
“In terms of fundamentals, it’s whether we are talking about people providing a financial service – if that’s the case, you need to have an AFSL,” Ms Taylor said.
“Secondly, are there deceptive statements in that information, and thirdly market manipulation – we are seeing more in terms of pump and dump activity [or] momentum trading, and we need to be really cognisant of that. If there’s a deliberate attempt to interfere with the fair operation of a market, ASIC will want to investigate.”
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