Regulation  

Internet investment tipsters need adviser-level oversight

Internet investment tipsters need adviser-level oversight

Tipsters posting on investment forums should be forced to meet the same high-standards demanded of financial advisers to avoid market abuse, according to the Chartered Institute for Securities and Investments.

Contributors on informal online bulletin boards often indulge in behaviour a regulated practitioner would be banned by the Financial Conduct Authority for, it was claimed during a recent Corporate Finance Forum meeting held by the Cisi.

Anonymity was branded the root cause of the problem by those at the meeting, who argued the few websites insisting on members displaying their own names and occupations are outnumbered by those which don’t.

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Those attending the Corporate Finance Forum meeting called for the regulator to act against online investment committees.

“The view was the actions of bloggers and subscribers to bulletin boards often constituted market abuse, with several examples being given from attendees’ direct experiences, and that the regulators should have a role to play in enforcing the rules as strictly as they would with a financial adviser,” Nick Bealer, head of corporate broking at Cornhill Capital and a Chartered Fellow of the Institute, said.

“It was generally accepted at the meeting that anonymity was a root cause of this behaviour. Although a few websites insist on members displaying their own names and occupations, most don’t.”

He argued given the strong ethical basis required to be a regulated person - the ‘fit and proper’ test - this should also be applied to anyone posting about a financial product.

Removing anonymity would be “the one step that would have the biggest impact” in improving the behaviour on the bulletin boards and other social media sites, he said.

It was also suggested people posting on bulletin boards be made aware of the possible consequences of their actions.

Some called for the FCA take action against serious offenders, since high profile cases would act as a deterrent.

Last year the regulator published guidance which said financial services firms should include risk warnings when mentioning certain products or services on social media.

The FCA also warned advisers they could get in trouble if they ‘retweet’ or otherwise republish their customer’s messages through Twitter or other social media, where the message relate to product recommendations.