SEC probing anonymous social media posts
In an expected twist, the many evils of social media are shadowing the stock market.
The Securities and Exchange Commission (SEC) is examining anonymous social media posts promoting stocks with company logos targeting investors trading on the Internet.
These are not company-sponsored, and some may even be fooled into thinking this is an official company communication, one trader pointed out. This has been going on for some time and there are a large number of gullible investors being misled, he added.
The Colombo Stock Exchange (CSE) has also resorted to constituting action against certain institutions for using the CSE logo without their consent. Rajeeva Bandaranaike, CEO CSE told the Business Times on Wednesday that the market operator took action against two institutions using the CSE logo without their consent to promote shares in the stock market.
“This is a serious violation. We do not promote stocks. It is highly misleading,” he said.
The digitalisation of the CSE has seen as many as 30,000 new Central Depository System (CDS) opened last year. The latest features of the CSE mobile app include CDS eConnect and MYCSE, helping a variety of stakeholders. The investors have grown by five folds to 60,000 last year from 2019 which had only 12,000 investors. The target is to grow the new investors to 1 million in two years. Now the CSE has more than 70,000 active investors up from 30,000 in 2019 with over 120 per cent growth. Last year some 27,000 CDS accounts were opened through the CSE mobile app. There are 150,000 active users since the app’s launch 15 months ago.
In 2021, the CSE recorded daily trades of over 32,000.
As the data shows, this paperless system enabled many new traders – young and upwardly mobile constantly seeking new information on stocks. Data show that 83 per cent of the new CDS accounts opened are from those who are less than 40 years of age.
Many who want to promote shares are resorting to social media now as it is the cheapest and the easiest way to do so especially at a time when most newcomers into the market are accessing the information on smartphones, an analyst said noting that this has allowed much misleading information as well. “It is important to sift the factual information from the avalanche of information out there in the public domain. This can be easily done through social media belonging to the market operator and the regulator,” he said.
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