The Cyprus Securities and Exchange Commission announced a new investor protection campaign to help tackle the growing international scourge of investment harm.
CySEC particularly warned of the rising adoption of ‘finfluencers’ and “gamification” techniques used on social media channels to manipulate young investors.
George Theocharides, CySEC chair, said rapid technological development, uncertain market conditions and the COVID-19 pandemic have contributed to a significant increase in online retail trading.
“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; this has exacerbated the risk of young people not fully understanding the unique characteristics and risks that trading in these products can carry, many will get in over their head.”
Social media channels are increasingly being used to promote complex and risky products, like crypto-assets, with some employing celebrities and online influencers to sway investors to invest in products they know very little about.
The gamification of investing is also raising red flags.
“Not surprisingly, these gamification techniques are particularly attractive to younger people, many of whom with little experience in investing and will likely end up losing their money,” said Theocharides.
CySEC’s new campaign will warn investors not to make decisions based on emotions and social pressure but rather through rational thinking and acquiring more knowledge of the products they’re buying and who they are buying them from.
The campaign complements CySEC’s ongoing supervisory work to clamp down on unlicensed investment services and to warn licensed entities of their legal obligation to protect their customers’ interests.
Theocharides said there is a crucial need for financial education programmes to help people develop new skills, which has been recognised in the recently approved national strategy on the promotion of financial literacy.
The CySEC campaign includes a series of investor guides available on its website dedicated to financial education https://www.cysec.gov.cy/en-GB/investor-protection/financial-education/