European Securities and Markets Authority Points Assertion on Funding Suggestions on Social Media | Shearman & Sterling LLP
The European Securities and Markets Authority has published a statement on the requirements of the EU Market Abuse Regulation for companies and individuals who make investment recommendations on social media. ESMA is concerned about the potential harm to retail investors who may base their investment decisions on information made available on social media sites, particularly in situations like the Gamestop case. The EU rules, which are designed to prevent the misleading of investors, apply to anyone inside or outside the EU who disseminates information that disseminates an investment decision about EU financial instruments listed in the EU or financial instruments that depend on or influence price or value of a listed financial instrument. The types of financial instruments include stocks, bonds, derivatives, contracts for difference, and carbon credits. Certain digital assets that are categorized as securities can also be captured. The rules apply when the distribution is aimed at a wide audience and can be in analyst reports, articles, and traditional or social media. Investment recommendations must be accompanied by certain information such as the identity of the person making the recommendation and conflicts of interest. Failure to comply with the rules can constitute market manipulation that can be punished under civil or criminal law.