In a meeting today, the Securities and Exchange Commission’s Investor Advisory Committee (IAC) published draft recommendations regarding the rise of “Finluencers”—individuals who may promote securities offerings on social media.
While the IAC may submit recommendations to the Commission, there is no requirement for the SEC to adopt any regulatory changes.
The IAC advises the Commission to collaborate with FINRA to close “regulatory gaps and to do the following:
- The SEC should adopt a rule requiring certain disclosures related to finfluencer activity in providing investment advice regarding securities.
- The SEC should advocate for Section 12 liability for misleading, deceptive, or fraudulent finfluencer conduct.
- The SEC should gather and publish data related to finfluencer misconduct.
- The SEC should provide guidance to, and engagement with, finfluencers regarding applicable federal securities laws and regulations.
- The SEC should issue best practices for investment advisers.
- Encourage broker-dealers and investment advisers to train finfluencers that they utilize and enhance oversight of finfluencers.
- SEC and FINRA should continue to provide investor education regarding red flags and risks of relying on finfluencer advice.
- The SEC should encourage traditional investment advisers to enhance outreach and education to newer investors.
- The SEC should seek to work with the Federal Trade Commission to incorporate in their guidance examples that apply to investment advice provided by finfluencer activities under The Federal Trade Commission Act.
- The SEC should consider engaging constructively with social media platforms to understand their guidelines to monitor problematic finfluencer activity.
- The SEC should consider international cooperation.
- The SEC should study whether existing anti-fraud anti-manipulation provisions are sufficient to protect investors.
The complete recommendations are available here.