The European Securities and Markets Authority (ESMA) and National Competent Authorities have issued a stern warning regarding the posting of investment recommendations on social media platforms. The Market Abuse Regulation (MAR) has been highlighted as the cornerstone framework governing such activities, aiming to curb market manipulation and ensure transparency and accuracy in financial communications. You can find the exact announcement on ESMA website.
According to the authorities, any public communication, including posts, videos, or other forms of social media content, that provides advice or ideas regarding the buying or selling of financial instruments or portfolio composition falls under the definition of an investment recommendation as per MAR guidelines. This includes both technical and non-technical language, emphasizing the broad scope of the regulation.
What is an Investment Recommendation?
According to the MAR it can be any post, video, or any other type of public communications, including social media, in which a person gives advice or ideas, directly or indirectly, about buying or selling a financial instrument or on how to compose a portfolio of financial instruments.
Even if a person is using “non-technical” language, gives advice or ideas, directly or indirectly, about buying or selling a financial instrument or on how to compose a portfolio of financial instruments, it may constitute an investment recommendation.
What are the specific requirements?
The general set of requirements require any person producing investment recommendations to:
- Include the identification of the producers of the recommendation: name, job title of all the persons involved., and the date and time of the recommendation.
- Ensure the objective presentation of investment recommendations: facts clearly distinguished from interpretations, estimates and opinions. Confirm all sources of information are reliable and, where in doubt, clearly indicate it.
- Disclose any conflicts of interest in a clear way, so investor would take notice of it. When recommendations are voiced via different social media channels, each of them must include a disclosure of interests or conflicts of interest.
The additional requirements require “professionals” and “experts” to disclose:
- A summary of any basis of valuation/methodology and the underlying assumptions used.
- The length of time of the investment and an appropriate risk warning.
- The planned frequency of updates to the recommendation.
- If the recommendation has been amended after being disclosed to the issuer.
- If they hold a net long or short position above 0.5% of the total issued share capital of the issuer.
What happens if you do not comply?
You are exposed to sanctions. National Competent Authorities can impose administrative or criminal sanctions that may vary according to the member state for certain types of infringements.
