1 year ago
83 The country’s financial regulatory body, the Cyprus Securities and Exchange Commission (CySEC) is behind the campaign, which warns of using colorful apps that make trading seem empowering instead of intimidating .
The watchdog issued a public statement advising retail traders to be cautious when engaging so-called “finfluencers” and conduct serious due diligence on any prospective partners. It says those promoters must be licensed to give financial advice, or are authorised representatives of advisers. The same rules apply to influencers who earn affiliate commissions for referring their pages’ followers to online brokers, which also requires a licence to give such advice.
The regulator added that investment recommendations had to be produced in an objective and transparent way, so that investors could distinguish fact from opinions.
These warnings were in response to a rise in unregulated trading offers on online forums, and a concern that retail investors are not aware of the risks associated with following such tips.
The increase in media coverage and hype around so-called ‘meme stocks” and cryptocurrencies has aroused public interest. However, the public might use these as speculative tools without full understanding of their nature and potential risks.
Launching the campaign, Dr George Theocharides, Chairman of CySEC, said: “Rapid technological development, uncertain market conditions and the COVID-19 pandemic have all contributed to a significant increase in online retail trading in recent years. CySEC is concerned at the growing participation of younger inexperienced investors, and the proliferation of material on social media and online platforms to promote complex products that are not always what they seem. It is particularly worrying that already low financial literacy levels are also declining and this has exacerbated the risk of young people not fully understanding the unique characteristics and risks that trading in these products can carry and many will get in over their head.”
The campaign also focuses on the tactics that some brokers use to keep consumers engaged, alleging that it encourages them to use their platforms through what it calls “gamification.”
Treating investment like a game and luring young and inexperienced customers to make more trades is not only unethical, but also falls far short of the standards CySEC requires in Cyprus.
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