The CNMV warns influencers who give advice without financial knowledge

The CNMV warns influencers who give advice without financial knowledge

The CNMV has reviewed the activities on social networks (Instagram, Facebook, Tik Tok, etc.) carried out by influencers, and has detected that more than fifty of them issue investment recommendations without complying with the requirements established by the European Union (EU) regime.

In this regard, the CNMV has requested explanations and clarifications from these influencers regarding their activity in this sector. 

The danger of relying on untrained financial influencers 

Influencers are people who exert a great deal of influence, and specifically, influence the consumer habits of their followers. 

Social networks have become the great communication channel of the 21st century, with many influencers, youtubers, tiktokes, who take advantage of this tool to disseminate information and recommend financial investments, which does not always come from experts in the field, is sometimes biased, or even involves many risks that are not clearly communicated to the consumer.

One only needs to look at social media to see that the hashtag #FinTok (financial trading and TikTok) has more than 1.3 billion views, while hashtags such as #financialfreedom on Instagram have more than 3 million posts, and #investing has more than 13 million.

In this sense, the CNMV aims to promote compliance with the objectives of the legislation. That is, that those who make investment recommendations identify themselves appropriately, present the recommendations objectively and disclose all relationships or circumstances that could affect their objectivity. And to ensure equal treatment of supervised persons and entities that issue recommendations in compliance with regulatory requirements.

Financial advice, a regulated activity in Europe. 

The activity of preparing and disseminating these recommendations is regulated in EU Regulation 596/2014 on market abuse and in the Delegated Regulation (EU) 2016/958 that implements it. The main objectives of the regulation are that the recommendations are presented in a clear, accurate and objective manner and that the interests and conflicts of interest of the person issuing the recommendation on the financial instruments to which it refers are disclosed. In the case of experts, the regulations provide that additional requirements must be followed.

This regulation states that when recommendations are prepared and disseminated by individuals such as influencers and not by supervised firms, they are qualified as ‘experts’ and are subject to additional requirements.

The CNMV points out that in order to determine whether a recommendation is issued, it is necessary to analyse the substance of what is communicated, i.e. whether an investment strategy is recommended (buy, hold or sell financial instruments), regardless of the name given to the communication, its format or the medium through which it is disseminated (it may be electronic or verbal, for example). Thus, for information to constitute a recommendation, it does not need to be in writing or to be labelled as such.

CNMV threatens financial influencers with fines of up to 500,000€ 

The CNMV’s objective is to promote compliance with the aforementioned legislation, i.e. that those who make investment recommendations identify themselves properly, present the recommendations objectively and disclose all relationships or circumstances that could affect their objectivity, as well as ensuring equal treatment with supervised persons and entities that comply with the requirements.

Consequently, the CNMV has contacted them and it seems that they should cease this work, for which they are liable to fines of over 500,000 euros for serious infringements. An important wake-up call.
In this regard, we should mention cases such as Kim Kardasian, who recently paid a fine to the US market supervisor, the SEC, of 1.26 million dollars (1.3 million euros) for promoting a cryptoasset on her Instagram account without saying that it was advertising, or the slap on the wrist of former footballer Andrés Iniesta for a comment on his social networks promoting the cryptocurrency trading portal Binance. The Spanish market supervisor then reminded the former FC Barcelona player that cryptoassets, being an unregulated product, “have some relevant risks”.