IOSCO targets finfluencers, online imitative trading & digital engagement

On 19 May 2025, as part of its roadmap for retail investor online safety, the International Organization of Securities Commissions (IOSCO) published its Final Reports on finfluencers, online imitative trading practices and digital engagement practices (DEPs). The Final Reports identify good practices that regulators and financial intermediaries should put in place in managing potential risks on retail investors. On 21 May 2025 IOSCO also issued a Statement on combatting online harm and the role of platform providers.  We discuss these developments below and highlight aspects of particular relevance to our subscribers.  

Statement on combatting online harm and the role of platform providers

IOSCO identifies measures currently used in some jurisdictions that can help disrupt online harm and is calling upon platform providers to adopt them. These include:

• conducting due diligence on unauthorised offerings – platform providers should ensure that entities seeking to advertise paid content on their platforms are legally authorised to operate in the targeted jurisdictions and are not the subject of investor warnings by regulators.
• familiarisation and compliance with legal requirements – platform providers should ensure knowledge of and compliance with all applicable local laws and regulations in the jurisdictions where the platform provider carries on business.

Final Reports

Unlike the Statement which is addressed specifically to platform providers, the Final Reports are addressed to regulators as well as financial intermediaries, finfluencers and investors, and contain good practice proposals applicable to each.  The Final Reports are discussed in more detail below.

Finfluencers report

The Finfuencers report identifies potential gaps in regulatory coverage, particularly for unregistered individuals who influence retail investors without the professional qualifications or oversight required of registered investment advice professionals.  IOSCO highlights that the global reach of social media complicates jurisdiction oversight and enforcement, necessitating enhanced international cooperation amongst securities regulators.  Good practices are proposed for regulators, market intermediaries and finfluencers.  These include:

• avoiding advertising higher-risk or more complex financial products to retail investors except in compliance with conditions/guidance issued by regulators.
• having a rigorous selection policy for finfluencers (e.g. researching their credentials, education etc), and having agreements with them that set out the rules and compliance obligations applicable to the finfluencer.
• having appropriate risk management frameworks to monitor the activities of finfluencers.
• providing a standard template for a disclaimer to ensure consistency and compliance, that sets out whether the finfluencer is licensed to provide investment advice, and if they are being compensated.
• having in place robust conflicts management procedures to manage conflicts between market intermediaries, finfluencers and potential investors, and to make applicable disclosures where appropriate.
• ensuring the finfluencer’s content uses plain language, and contains clear, impartial, and accurate information on the products they are discussing.

The Finfluencers report also sets out 10 “tips” for retail investors, intended to help them better evaluate content from Finfluencers.  

The online imitative trading practices final report

This report identifies a growing intersection between imitative trading strategies and the activities of finfluencers promoting trading platforms and strategies through social media.  IOSCO explains that this blurs the lines between the provision of regulated financial advice and the provision of general financial information. IOSCO also notes the cross-border nature of the provision of imitative trading marketing and selling, which makes jurisdiction oversight and enforcement difficult.  To help mitigate these findings, IOSCO proposes good practices focusing on these risks and emphasises the importance of promoting investor education to help investors understand the risks involved.  These include:

• examining whether their imitative trading services fall within the regulatory perimeter of the relevant jurisdiction(s).
• monitoring their marketing activities in respect of imitative trading services against jurisdictional regulatory requirements.
• having procedures for the selection and removal of lead traders who operate on their platform, which assess their qualification, their level of knowledge, and any complaints against them.
• regularly reviewing the conduct of lead traders and the outcomes of imitative traders on the platform for compliance with the applicable laws and regulations of relevant jurisdictions.
• assessing the conflicts of interests that may arise, including the remuneration paid between lead traders, the platform provider and copy traders, and disclosing these where necessary.

The digital engagement practices final report

This report identifies that DEPs can improve access and enhance choice for retail investors but that they may also result in investor harm by encouraging investors to trade more often and invest in higher risk products without understanding the risk.  The cross-border nature of product offerings may increase the risk of mis-selling, as well as the “herd behaviour” induced by social media.

This final report considers that it would be beneficial for IOSCO to develop a common understanding of DEPs; to review the emerging DEP techniques and associated conduct and retail investor protection issues to understand the impact on retail investors from increased use of DEPs by market intermediaries.  The final report identifies the issues and gaps in regulation of DEPs and proposes good practices to foster regulatory alignment in their supervision and regulation. This final report also analyses how DEPs can be used to promote investor education and educational material. The good practices include:

• market intermediaries should ensure that DEPs used for investment advice or recommendations are not intended to increase transaction volume and fees, without regard to the interests of retail investors.
• where the use of DEP entails provision of investment advice or recommendations, market intermediaries must ensure they hold the relevant licence/regulatory status and comply with the applicable regulation.
• market intermediaries should ensure that DEPs used for investment advice or recommendations are not used for products and services that are inconsistent with the retail investor profile, in line with the relevant jurisdiction rules on suitability.
• market intermediaries should regularly monitor DEPs used for investment advice or recommendations to analyse if they put the interests of the market intermediary above the interests of the retail investor (including reviewing complaints), and if so, should correct this to prevent its reoccurrence.  

For further information, please find the IOSCO Statement here, and the IOSCO press release linking the Final reports here. 
Please click here for our article on the IOSCO retail report published in March 2023.
Please click here for our article on finfluencers.