Social media and the gamification of investment via smartphone apps may be putting inexperienced and younger investors at risk, the European Union’s securities watchdog warned today.
Gamification, which refers to game-like user engagement on trading platforms like Robinhood, has come under the eye of regulators globally as investors flocked to online trading platforms through lockdowns.
But Verena Ross, chair of the European Securities and Markets Authority, told a Forum Europe financial services conference that social media had allowed misleading trading advice to proliferate which was putting investors at risk, Reuters reported.
She said: “We are looking at how to raise awareness and warn investors what they are letting themselves in for.”
The bloc is due this year to revamp its “retail investor” strategy to reflect the rise of digital finance, Ross said, and the EU has already proposed banning “payment for order flow” to put safeguards around retail investing on online platforms.
In the UK the Financial Conduct Authority similarly warned last year that younger and more inexperienced traders were getting involved in higher risk investments, prompted by new investment apps.
Research from the FCA found that the thrill of investing, and social factors like status were key reasons behind the decisions to invest for younger consumers.
It comes as new figures reveal retail investment activity has boomed in the last two days amid a tumultuous day in the markets.
Retail investors bought a net $1.36bn in equities on Monday after geopolitical tensions sent global markets into their biggest monthly slump since March 2020.