False financial advice will get tougher penalties
Russians often trust the recommendations of bloggers and anonymous Telegram channels on investments, which is why they lose their money, and then go to complain to the police. The Bank of Russia is aware of this problem and proposes to strengthen the responsibility for illegal investment advice and prohibit investing in organizations not supervised by the regulator. Such a proposal was voiced by the head of the service for consumer protection and ensuring the availability of financial services of the Central Bank of the Russian Federation, Mikhail Mamuta. Whether such measures will solve the problems of the investment services market, MK discussed with experts.
In Russia, there is a social demand for advice on the proper investment of savings. But the problem is that citizens often do not conduct even a minimal examination in order to understand how much they can trust the assessments of this or that investment blogger. There is also a difference between studying the advice of billionaire Warren Buffett, who earned his first million dollars in stocks by the age of 32, and an anonymous Telegram channel advising you to buy shares in a little-known plant. The Central Bank of the Russian Federation decided to deal with the second type of advice.
“Often, people who call themselves investment advisers are not, that is, they are not members of SROs (self-regulatory organizations) of the financial market and are not included in the register of investment advisers maintained by the Bank of Russia,” Mamuta said. “People follow some kind of advice from telegram channels, often anonymous, generally unknown people, or advice like a guru.” As a result, citizens often lose money, after which they complain to the prosecutor's office and the police. According to Mamuta, the institution of investment advisers should be improved, responsibility for recommendations should be strengthened, and it should be prohibited to raise funds from Russians in companies that are not under the supervision of the regulator, «because there is no other way to win.» In addition, it is necessary to conduct ongoing educational work in the field of investment literacy.
The problem of false financial advice exists not only in Russia, but also in other countries. “One of the most common fraudulent practices in the financial market is the “pump and dump” scheme, which is especially popular in the “penny securities” market,” says Maxim Osadchiy, head of the analytical department at BKF Bank. — Fraudsters buy such securities and increase their value with the help of false recommendations. An important element of the scheme are «financial advisers», «finfluencers» who convince gullible simpletons of the profitability of such investments. A stormy surge of fraudulent schemes, including “pump and dump”, is associated with cryptocurrencies, as well as with the growth in the popularity of social networks.” The described scheme is immortalized in the film The Wolf of Wall Street, where the main character, a stock market tycoon and a swindler, successfully persuades a simpleton to buy «penny stocks.» This is a form of market manipulation. In Russia, if the fact of such a crime is proved, the swindlers can be deprived of their liberty for up to seven years.
There are a lot of examples of the application of this scheme in domestic practice; recently, crooks have been actively using telegram channels. For example, in a press release from the Central Bank of the Russian Federation dated November 24, 2022, the regulator indicated that it had established the fact of market manipulation in the course of trading in the shares of a number of factories and regional companies. “If we talk about social networks (and they are an important platform for investment advice to the population), then in the Telegram network, out of about 1.3 million registered channels, about 44 thousand are devoted to the topics of the economy, cryptocurrencies and business, according to the TgStat service, that is, about 3% «, — continues the conversation assistant of the Department of State and Municipal Finance of the Russian University of Economics. G.V. Plekhanova Irina Kamburova. In order to impose bans on any activity, it is necessary to accurately define it, otherwise conscientious consultants who simply express their views on the situation on the stock exchange may also be subject to restrictions, and then people may have difficulty finding information to make investment decisions, the expert pointed out. .
The activity of an investment adviser is regulated by the Law “On the Securities Market”, the instructions of the Bank of Russia on the requirements for such activities, as well as the basic standard of their work. “These documents, in particular, spell out what information an investment recommendation should contain and in what form the adviser should provide it to you,” Yulia Kuznetsova, a member of the expert council for the protection of the rights of retail investors, continues the conversation. Investment advisers should give recommendations and be responsible for them, as well as be a member of the SRO, which regulates their activities. There are only two such SROs in Russia — AMIKS and NAUFOR. In total, according to the register of investment advisers of the Central Bank of the Russian Federation, 222 legal entities are registered in our country that can be investment advisers, including 82 individual entrepreneurs (IP). Companies or people not on this list are not supposed to give people individual investment recommendations. These persons are responsible for their advice, but telegram channels with a description of “signals to buy or sell” are not. But the problem is much deeper. The financial services market is very poorly developed in Russia. And among the 82 individual entrepreneurs included in the register, only a few give investment recommendations. The rest, as a rule, conduct training courses and use their status for PR purposes.
Thus, there are many reasons for the problem of the appearance of fake «investment gurus» in Russia: both the underdevelopment of the market, the need of novice investors for information that is nowhere to be found, and the frankly fraudulent actions of intruders. Accordingly, in order to solve it, comprehensive measures will also be required, and only with bans and fines can the nascent industry of the investment services market in Russia be hacked to death.