The European Securities and Markets Authority (ESMA), the European Union’s financial markets regulator, has issued a letter to multiple social media and digital platform companies. These include X, Meta, TikTok, Alphabet, Telegram, Snap, Amazon, Apple, Google, and Reddit.

The letter urges these companies to take active measures to prevent the promotion of unauthorised financial services on their platforms.

Fraudulent Ads Threaten Investors and Trust

In its letter, ESMA emphasizes the impact of online scams on both investors and society. It states: “The increasing spread of online scams targeting retail investors poses a serious risk to investors themselves and to society as a whole, with fraudulent actors exploiting digital platforms to advertise unlawful financial services.”

“These activities often mislead consumers into engaging with firms that lack proper authorisation resulting therefore in financial losses and also in the loss of trust in the financial sector and, more widely, in social media platforms and in the digital environment,” the letter further explains.

ESMA highlights the growing problem of online scams targeting retail investors. Fraudulent actors use digital platforms to advertise financial services without proper authorisation. This practice can mislead consumers and cause financial losses. It also harms public trust in the financial sector.

You may find it interesting at FinanceMagnates.com: ESMA Eyes Marketing of Financial Products in EU, Focuses on Risky Instruments.

Global Effort Targets Online Financial Misconduct

The regulator’s action follows a recent initiative by the International Organization of Securities Commissions. That initiative addressed the global scale of online harm related to financial misconduct. ESMA ’s letter aims to support efforts to reduce such risks in the EU and beyond.

CFD Brokers Shift Amid ESMA Changes

Meanwhile, ESMA, under the MiFID II framework, is proposing a new reporting requirement for firms to classify clients as retail, elective professional, professional, or eligible counterparties. This aims to help national regulators monitor the distribution of complex products like CFDs.

The move follows a trend of brokers such as IronFX, BDSwiss, Exness, and FXTM shifting away from the European retail market, either exiting, focusing on institutional clients, or continuing to serve retail clients via offshore operations.