The Securities and Exchange Commission announced an upcoming meeting of its Investor Advisory Committee, which will be held on June 6, 2024. The agenda includes a number of interesting topics.
The Committee will consider and address the impact of “finfluencers.” The agenda notes that recent studies have found that these social media influencers who focus on financial services seem to have a particular impact on younger investors and on investors of color. According to studies, investors of color are more apt to rely on social media, trading apps and similar sources of information, rather than investment advisers, for financial information. Among the materials that will be considered and presented at the meeting is a January 2024 study titled, “The Finfluencer Appeal: Investing in the Age of Social Media,” which was published by the CFA Research & Policy Center. The study considered the role of social media in the financial services sector, focusing specifically on finfluencers who provide general investment information, promote investment products, offer investment guidance and sometimes make investment recommendations. The report analyzes the finfluencer model and the adequacy of regulatory and policy frameworks in several jurisdictions, including the United States, the United Kingdom, Germany, France and the Netherlands. It notes that generally the content published by these influencers is not tailored or customized by region. Most of the content discusses individual stocks, index funds, and ETFs. The study makes a number of suggestions for regulators—among these, the study suggests that regulators should develop a more universal definition of an “investment recommendation;” that national regulators should engage with finfluencers; that national regulators should record and publicly report data on complaints and whistleblower activity relating to finfluencer posts and commentary; regulators should enhance social media controls; and finally that firms using finfluencers should provide compliance training, review their posts, and maintain records of their posts and materials. FINRA is already focused on the activities of member firms with respect to finfluencers. We commented on this in an earlier post. The Committee will consider recommendations in light of the issues raised by the study, as well as those already known to FINRA and observed by others.
The Committee also will consider the development of various AI technologies and address issues related to disclosures, data controls, bias, and education, with the objective of understanding how the SEC might promote the advancement of AI while addressing these concerns.
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