ESMA with a whip against "touts". There will be no impunity in promoting investments in social media

The end of the free American woman on social media. Not only influencers, but all people who will recommend any financial investments, including cryptocurrencies, Traders Union: Best Low Spread Forex Brokers or shares, will have to not only be particularly reliable, but also provide... their name, surname and specify the date and time of the recommendation.

“Hey, hey, dudes! A new airdrop is coming to the XY exchange! We pack as much as we can and go here de mun! It's a cool project, it has solid foundations and there's a good chance of growth.”

This is not a distorting mirror at all. Based on such entries, many people make decisions about investments, e.g. in cryptocurrencies. Some consciously, taking advantage of the fact that at the right time, only good PR or even a catchy name is enough for the project to bring above-average rates of return, but others do not, which often results in a loss of capital.

That's one of the reasons why the European Securities and Markets Authority (ESMA) is setting this right now requirements for publishing investment recommendations on social media. Moreover, together with the European Union authorities, ESMA will also publish messages to warn against possible market manipulation.

Transparency and accuracy are key when posting on social media, especially when making investment recommendations. Therefore, if you are a financial influencer, expert or someone who is simply interested in financial investments, you must be aware of the principles of established rules and be able to recognize an investment recommendation – we read in a letter from the European Securities and Markets Authority.

What is an investment recommendation?

Therefore, it will be crucial to determine what constitutes an investment recommendation. Because until now it was enough to include a formula stating that, for example, the entry that the WIG20 index will increase is not an increase at all and that's it. Now it won't be so easy. According to the new ESMA guidelines, a recommendation is virtually any post, video or other type of public communication, including on social media, in which, directly or indirectly, advice is given or ideas are presented on the purchase or sale of a financial instrument or how to compose a portfolio of financial instruments. So the most important word is "indirectly", but also to give birth, there will probably be a lot of discussion. There is a lot of room for interpretation.

Importantly, it is not necessary to use specialized language for a given publication to be considered a recommendation or investment advice. Even presenting your ideas (again: directly or indirectly) about the purchase or sale of a financial instrument or how to compose a portfolio of financial instruments may constitute an investment recommendation - we read in Regulation No. 596-2014 and the relevant delegated and implementing regulations added to it.

What to do when publishing information about financial instruments

The regulation is very detailed and indicates specific guidelines that must be met when writing or speaking about financial markets on social media.

The set of requirements obliges every person preparing investment recommendations to:

• adding identification data of the recommendation creators: name and surname, position of all people involved and date and time of the recommendation,
• ensuring objective presentation of investment recommendations: facts must be clearly separated from interpretations, estimates and opinions,
• confirming that all sources of information are reliable, and in case of doubts about their reliability, this must be clearly indicated,
• disclosure of possible conflicts of interest so that the investor notices them in every channel where the recommendation appears.

More requirements for professionals

Professionals and experts have even greater requirements. They must summarize the basis for the valuation and its preparation methodology and describe the assumptions used. Of course, they are also obliged to provide a risk warning, but also indicate the duration of the investment and even the planned frequency of updating the recommendations.

They must also inform in their recommendation if they have a net long or short position exceeding 0,5% of the total issued share capital of the issuer about which they are commenting.

All those who do not comply with the new guidelines must take into account that national authorities may impose administrative or criminal sanctions on them.