The European Securities and Markets Authority (ESMA) and the corresponding national competent authorities in EU countries have announced that they are raising awareness of the requirements established by the Market Abuse Regulation (MAR) that apply to the publication of investment recommendations on social media.
Regulators also warn of the risks of market manipulation in such publications.
When posting on social media, transparency and accuracy are key, especially when making investment recommendations. That is why, if you are a financial influencer, a technical expert or someone who is just interested in financial investments, you need to know the rules established under the MAR framework and be able to recognize an investment recommendation.
What is an investment recommendation?
According to MAR, it can be any post, video or any other type of public communication, including social media, where a person gives advice or ideas, directly or indirectly, about buying or selling a financial instrument or about way of drawing up a portfolio of financial instruments.
Even if a person uses “non-technical” language, giving advice or ideas, directly or indirectly, about buying or selling a financial instrument or how to compile a portfolio of financial instruments, it can be an investment recommendation.
Where are the rules set?
In the MAR framework, consisting of regulation no. 596-2014 and the relevant delegated and executive regulations.
What are the specific requirements?
The general set of requirements requires any person making investment recommendations to:
- Include the identity of the producers of the recommendation: name, job title of all persons involved and date and time of recommendation.
- Ensuring the objective presentation of investment recommendations: facts clearly distinguished from interpretations, estimates and opinions. Confirm that all sources of information are reliable and, where in doubt, clearly indicate so.
- Disclose any conflicts of interest clearly so that the investor is aware of them. When recommendations are expressed through different social media channels, each must include a disclosure of interests or conflicts of interest.
Additional requirements require “professionals” and “experts” to disclose:
- Summary of any valuation basis/methodology and underlying assumptions used.
- The duration of the investment and an appropriate risk warning.
- The scheduled frequency of recommendations updates.
- If the recommendation has been modified after notification to the issuer.
- If they hold a net buying or selling position of more than 0.5% of the total issued share capital of the issuer.
What happens if you don’t comply?
You are exposed to penalties. National competent authorities may impose administrative or criminal penalties which may vary by Member State for certain types of infringements.