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ASIC urges care over investment hype

Yasmine Masi27 October 2023
Man caught in money trap

Australia’s corporate regulator has launched a mass campaign to warn consumers against buying into investment hype, to coincide with the release of a film chronicling the GameStop short squeeze episode in 2021.

The campaign encourages investors to thoroughly research opportunities prior to investing in them, with a video advertisement to play before screenings of the film.

“Before choosing to invest, people should familiarise themselves with the golden rules of investing and understand the associated risks. They shouldn’t believe the hype – if an investment sounds too good to be true, it probably is,” ASIC Chief Executive Officer, Warren Day, said.

“First-time investors should be particularly cautious and aware of the inherent volatility and complexities of market trading. Speculative stocks, by nature, are high risk, high reward, with uncertain prospects. With high-risk investments, you should be prepared to lose all of your money.

“We encourage investors to pause and reflect before investing. Don’t get caught up in the hype. Take some time to research investment decisions, go to trusted sources for information, including moneysmart.gov.au.”

The ‘episode’ occurred in January 2021 after retail investors gathered on social media threads, such as Reddit group WallStreetBets, to collectively ‘short squeeze’ New York Stock Exchange (NYSE)-listed GameStop to counter the short positions held by hedge funds. As a result, GameStop’s share price soared by approximately 2,000 per cent before losing the majority of these gains by early February.

“Retail investors who use social media to ramp stock prices, ‘pump and dump’ shares and engage in market manipulation, may be in breach of Australian financial services laws. Additionally, online crypto scams and apps that seek to ‘gamify’ share trading also remain on ASIC’s priority list,” the statement from ASIC said.

“ASIC’s market surveillance team continually monitors market movements in real time and will take enforcement action where misconduct is identified.”

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Anon
6 months ago

“Go to trusted sources of information including moneysmart.gov.au”.

When you do go to ASIC’s moneysmart you will find nothing of great use, but you will find plenty of warnings about why NOT to use a professional licensed adviser. No wonder consumers are being duped by finfluencers, and other unlicensed spruikers who come across as “trustworthy”. ASIC does nothing to promote genuine professional advice, and actually discourages consumers from using it.

ASIC has ultimately made things worse for consumers.