On 6 February 2024, ESMA published a warning for people posting investment recommendations on social media (the “ESMA Warning”). While aiming to raise awareness on the requirements established by Regulation (EU) 2023/2779 of 6 September 2023 (the “Market Abuse Regulation” or “MAR”), it also warns about the risks of market manipulation when posting on social media.
What is an Investment Recommendation?
ESMA starts this warning with a reminder of the definition of an investment recommendation pursuant to Article 3(1)(35) of MAR: “information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public” constitutes Investment Recommendation. ESMA emphasises how broad the definition is and therefore appeals to people to be careful when posting any opinion on the price or value of a financial instrument or any advice on buying or selling financial instrument, so as not to fall within the scope of this definition.
Who is this ESMA Warning directed at?
Everyone because anyone can produce investment recommendations. In doing so, such persons are subject to requirements set out by MAR and its implementing Commission Delegated Regulation (EU) 2016/958 (“CDR 2016/958”, together with MAR, the “MAR Framework”).
MAR Framework Requirements?
The MAR Framework identifies a general set of requirements applicable to everyone and some additional requirements applicable only to professionals and experts which are summarised in a non-exhaustive manner in the ESMA Warning.
The general requirements applicable to any person producing or disseminating Investment Recommendations are those set out in Article 2, 3 and 5 of CDR 2016/958 and the additional requirements applicable to “professionals” and “experts” are those set out in Article 4 and 6 of CDR 2016/958. ESMA helpfully elaborates on who falls within the scope of the terms “professionals” and “experts” in this context.
ESMA reminds people of the potential consequences of non-compliance and also provides some practical examples of social media postings which could qualify as in/direct investment recommendations and where the general / additional requirements would likely be deemed to not be met.
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