IOSCO Offers Regulatory Guidance on "Finfluencers"

In a Consultation Report, the International Organization of Securities Commissions warned of the rise of "finfluencers"—social media users who share investment-related content—who may spread misleading information online. IOSCO requested comment on its proposed guidance.

According to IOSCO, "finfluencers" are transforming how retail investors (mainly young investors) make investment decisions. IOSCO reported that finfluencers pose as experts without "professional qualifications or oversight required of registered investment advice professionals." IOSCO raised concerns that the global reach of social media complicates jurisdictional oversight and enforcement. IOSCO reported that regulators have begun penalizing finfluencers via cease-and-desist orders, financial penalties and public warnings.

To address challenges posed by finfluencers, IOSCO proposed the following "good practices":

• Regulatory Clarification. IOSCO recommended regulators define the scope of finfluencer activities and set out specific guidelines on how current frameworks may apply to finfluencers. Regulators should also increase enforcement capabilities via data analytics and social media surveillance tools.
• Disclosures. IOSCO recommended that regulators (i) require finfluencers to disclose conflicts of interest (such as financial incentives/ affiliations with financial products they promote) and (ii) provide guidance on managing conflicts of interest.
• Investor Education. IOSCO recommended regulators develop educational initiatives, such as interactive online tools, public awareness campaigns and collaborative projects with institutions.

IOSCO also advised retail investors to: (i) check whether a finfluencer is licensed or qualified to provide financial advice; (ii) think skeptically of high-return promises made by finfluencers; (iii) understand that finfluencers may be receiving compensation for promoting products; and (iv) conduct independent research.