Curbing unlicensed advice on social media

The question is, is the Securities Commission (SC) equipped to monitor the vast corners of the Internet where these players operate in?

ONE of the biggest challenges facing regulators here and elsewhere is the rise of unlicensed investment advisers using social media to reach unsuspecting investors.

The situation in Malaysia is no different, with hundreds of groups on the telegram messaging service alone, promoting stocks and sometimes even seeking membership fees for those who wish to view their so called investment “tips”. The problem is most of the individuals on these platforms are unlicensed to give such advice.

The question then is, is the Securities Commission (SC) equipped to monitor the vast corners of the Internet where these players operate in?

Datuk Syed Zaid Albar, chairman of the Securities Commission (pic below) says: “Indeed, the mushrooming of social media chatrooms and unlicensed and unregulated activities and investment gurus pose a risk to not just the Malaysian capital market. It is also a global phenomenon, ” he says.

He adds that the SC has observed a rise in scams and unlicensed activities “as market uncertainties continue to create opportunities for unscrupulous parties to take advantage of unsuspecting investors”.

He explains that from the SC’s discussions with its peers at the recent Asia-Pacific Regional Committee of the International Organisation of Securities Commissions meeting, they have noted that social media has been used to lure and trap investors.

“This has occurred even in the more developed jurisdictions like Australia and Hong Kong. On our part, we have repeatedly issued cautionary statements to warn investors and ramped up our investor education activities, ” Syed Zaid tells StarBizWeek.

To address this, the SC has initiated a number of anti-scam awareness campaigns under its lnvestSmart platform, to remind investors to be vigilant on schemes offered on social media and messaging platforms. He adds that the SC’s Investor Alert list is constantly being updated, which can act as a guide to the public to identify unauthorised and unlicensed platforms.

Last year, the SC had taken action to address this issue. These include making 134 entries into the SC’s investors alert list and blocking 78 websites. In addition, the SC has set up a special task force to focus on scams and unlicensed activities.

“The SC has also enhanced internal capabilities in conducting internet surveillance and identify operators who offer capital services or products without obtaining a licence or registration from SC, ” says Syed Zaid.

In 2020, the SC’s Consumer and Investor Office had recorded an increase of 158% in complaints and 123% in enquiries on legitimacy of investment schemes.

“And all of this may only be the tip of the iceberg, ” he quips.

The regulator says investors have their part to play too.

“An educated investor is a protected investor. Investors need to play their part. Exercise caution before making any payments for capital market services or products, particularly for schemes offered through social media platforms. Trade based on fundamentals, not swayed by rumours or fear of missing out, ” says Syed Zaid.