[MAIN] INTERACTIVE: Fraud finfluencers in SC net

By SHYAFIQ DZULKIFLI

PETALING JAYA: The Securities Commission (SC) is stepping up enforcement against unlicensed and fraudulent finfluencers.

According to the SC, finfluencers are generally referred to as individuals who leverage social media platforms to share investment-related content, ranging from general financial education to specific stock recommendations.

To date, the commission has issued 31 cease-and-desist notices and one warning letter to those providing unlicensed investment advice.

The SC has also taken stronger action against five finfluencers, including two criminal charges as well as five reprimands with fines.

“The actions were taken amid growing regulatory concerns over the proliferation of self-styled investment gurus online.

“SC’s enforcement actions send a clear message that providing investment advice is a regulated activity and must only be carried out by licensed individuals or entities,” it said. 

The commission said it is actively monitoring the capital market, including social media content, to detect unlicensed activities.

The SC revised its guidelines on advertising for capital market products and related services in March last year, in light of factors such as the growing prominence of social media and finfluencers.

The revised Guidelines on Advertising for Capital Market Products and Related Service (Advertising Guidelines), which were implemented in November last year, formally classifies finfluencers as advertisers. 

“Under Section 58 read together Schedule 2 of the Capital Market and Services Act 2007, providing investment advice is a regulated activity that requires a licence from the SC.

“Unlicensed finfluencers may not have the necessary qualifications or experience to provide accurate investment advice and their recommendations could lead investors to make high-risk or even non-existent investments,” the SC said.

In granting such a licence, the SC assesses whether an individual is fit and proper, including whether they have the necessary qualifications and competency to provide investment advice.

“Promotions, regardless of whether they are undertaken by the finfluencers on their own accord or as an agent, are now considered as advertisements,” it said.

The SC has also tightened regulations to cover companies that engage finfluencers, making companies fully accountable for ensuring the social media content produced by the finfluencers comply with the commission’s rules and guidelines. 

The regulator said most of the complaints it has received involves unlicensed finfluencers promoting investment tips on social media.

In many cases, the approach follows a similar pattern, with finfluencers first sharing investment commentary and trading tips on social media, then draw followers into WhatsApp or Telegram groups. 

“After gaining trust, investors are encouraged to sign up for paid classes, seminars or subscription-based groups offering investment advice (stock tips),” it said.

Other types of complaints include misleading advertisements, potential market misconduct such as pump-and-dump schemes, and scams.

In a pump and dump scheme, fraudsters typically spread false or misleading information to create a buying frenzy that will “pump” up the price of a particular stock.

The fraudsters then “dump” shares of the stock by selling their own shares at the inflated price.

According to the SC’s Annual Report 2024, the commission has received a total of 4,859 complaints and enquiries in 2024, a 49% increase from 3,262 in 2023.

The SC identified a total of 796 URLs last year across websites and social media platforms for potential breaches related to the offering of unlicensed products and services to Malaysians. 

Among these, 59% were from Telegram, 19% from Facebook, 13% from websites, 4% from Instagram, and 5% from other sources, including TikTok, X, and YouTube.

 

The complaints and enquiries, as well as cases identified through surveillance, involve various types of scams, such as non-existent investment products and unlicensed activities.

The SC reminded investors to exercise caution when consuming financial content on social media, particularly content that promises quick or guaranteed returns.

Investors are encouraged to verify the licensing status of any individual or entity before responding to investment promotions through the SC’s Investment Checker (https://www.sc.com.my/investment-checker).