The EU’s markets watchdog has warned investors about the risks of following investment recommendations made on social-media platforms. The European Securities and Markets Authority (ESMA) issued a statement last month in response to a rise in investment recommendations made on social media, and a concern that retail investors are not aware of the risks associated with following such recommendations.

ESMA made clear what investment recommendations are, how to post them on social media platforms and what the consequences of possible breaches of the EU Market Abuse Regulation can be.

Anneli Tuominen, Interim Chair said, “In times where social media platforms are a key source of information for retail investors, I believe it is important that they should be aware of the risks associated with relying on recommendations disseminated on social media when making investment decisions.”

“The aim of the Statement is also to remind those who recommend investments on social media and other similar platforms of the applicable rules and what happens when those are not respected.”

If the rules relating to investment recommendations are not adhered to, there can be fines or further supervisory actions, which in case of dissemination of false or misleading information may potentially include the referral to Public Prosecutors for market manipulation.

EU law defines an investment recommendation as “information recommending or suggesting an investment strategy, explicitly or implicitly”, including any opinion on the present or future value of financial instruments. ESMA said that its statement was aimed at reminding those who recommend investments on social media of the rules governing such suggestions – and what would happen if they  were not respected.

The regulator said that investment recommendations had to be “produced and disseminated in an objective and transparent way”, so that investors could distinguish fact from opinions. “It is also crucial that investors are able to easily identify the source of information, and any conflicts of interest of those making the recommendations,” it added.

The watchdog warned those giving investment advice on social media that they faced fines or other enforcement actions if they broke the rules. In cases where false or misleading information was disseminated, there could be a referral to public prosecutors for market manipulation, the ESMA added.

NB – This is a guide for information purposes only and does not constitute legal advice. If you have an issue requiring legal advice, please contact any of the team at Nolan Farrell & Goff LLP, whose numbers can be found on our website, or email