COMMERCIAL
Alba Santaularia
The Growing Role of Influencers in Finance
The financial sector has embraced the trend of influencers. In recent years, so-called “finfluencers,” who provide investment recommendations, have experienced unprecedented growth in followers and content. This is largely due to Generation Z seeking financial advice from influencers rather than from regulated financial advisors. As a result, many investment firms turn to these influencers to promote their financial products.
In response to the proliferation of this phenomenon, the European Securities and Markets Authority (ESMA) issued a statement in late 2021 about investment recommendations on social media and the regulations applicable to such cases. Subsequently, the CNMV (Spain’s National Securities Market Commission) began reviewing the activities of influencers who might be issuing investment recommendations on social networks without fully complying with the law. Based on identified irregularities, in November 2023, the CNMV’s president reiterated that anyone, even if not a professional, issuing an investment recommendation must meet certain obligations.
The CNMV’s goal is to prevent market abuses and “reduce the regulatory gap” between professional analysts and influencers, ensuring that investors are equally protected regardless of the channel or method used to issue recommendations. For this reason, investment firms hiring influencers must know and ensure compliance with applicable regulations.
This article examines what influencers can and cannot do in the realm of financial advice under current regulations.
1. Permissible Activities for Financial Influencers
Article 125 of Law 6/2023, dated March 17, on Securities Markets and Investment Services, states that “investment advice” constitutes a service or investment activity. However, it clarifies that “generic, non-personalized recommendations made in the context of marketing securities and financial instruments” do not qualify as investment advice.
Article 129 of the same law specifies that “No person or entity, without the necessary authorization and registration in the corresponding administrative records of the CNMV or the Bank of Spain, may professionally or habitually engage in the activities outlined in Articles 125…” (which include financial advice).
Additionally, “The marketing of investment services and activities and the solicitation of clients may only be conducted professionally by authorized entities or through the regulated agents mentioned in Article 127.”
Therefore, influencers, unless they have the required authorization and are registered with the CNMV or the Bank of Spain, cannot provide financial advice or solicit clients through any channel (internet, call centers, or phone calls). However, they may issue investment recommendations.
2. Legal Requirements for Influencers’ Investment Recommendations
These requirements are outlined in the EU Market Abuse Regulation (Regulation EU 596/2014) and its accompanying delegated regulation (EU 2016/958). The main obligations are:
Identification: The influencer making the recommendation must clearly identify themselves.
Clarity and Objectivity: Recommendations must be presented in a clear, accurate, and objective manner.
Conflict of Interest Disclosure: The influencer must demonstrate that there is no conflict of interest regarding the financial instruments being recommended.
This third requirement includes disclosing any remuneration received for the recommendation. Investment firms cannot offer influencers variable compensation based on the number of clients acquired, as this would amount to client solicitation, an activity prohibited for unauthorized and unregistered individuals, as stated earlier.
Given the fine line between what constitutes a recommendation and financial advice, regulators would benefit from establishing a universal definition of what constitutes an investment recommendation. Furthermore, investment firms that collaborate with influencers should:
Provide training on compliance requirements.
Review the content influencers plan to publish to ensure it adheres to applicable regulations.
