The British Columbia Securities Commission (BCSC) has published a survey which found that younger adults and those who experience the fear of missing out (FOMO) are more likely to think social media is a good place to find investment opportunities.
Failing to act immediately on a new investment might lead them to miss a good opportunity, they believe.
Doug Muir, the BCSC’s Director of Enforcement, said: “Results of this new research are particularly concerning because we’ve seen a surge in potentially fraudulent schemes peddled on social media during the COVID-19 pandemic. We also know that fraudsters put pressure on people to act quickly. It’s important to gather as much reliable information about an investment as you can before putting your money into it, and to not rush into it.”
The BCSC document offers information regarding fraud-related warning signs, such as the claim of an exclusive opportunity that is available only to select people and rushing would-be investors, telling them they must sign now to get in on the deal.
The survey acts as an introduction to a multimedia campaign called Hi, My Name is FOMO, which intends to state the importance of doing research before investing.
The younger you are, the more FOMO you have, according to the survey, which adds that the more you experience FOMO the more likely it is to think that social media is a good source of investment opportunities. In addition, nearly half of younger adults experiencing FOMO believe that if you don’t act immediately, you might miss a good investment opportunity.
The survey was published one month after the meme stock trading frenzy which produced a short-squeeze in the GameStop stock. The rally was a successful coordinated move organized on the r/WallStreetBets subreddit.
A high and growing number of meme stocks and other trading instruments were subject to what might also be called pump and dump schemes. That interpretation led the Securities and Exchange Commission to suspend the trading of 22 securities that were going viral on social media.
Melissa Hodgman, Acting Director of the SEC’s Division of Enforcement, said: “The SEC’s recent suspensions of trading in nearly two dozen securities – including 15 today – are one facet of our ongoing efforts to police the market and protect investors. We proactively monitor for suspicious trading activity tied to stock promotions on social media, and act quickly to stop that trading when appropriate to safeguard the public interest. We also remind investors to exercise caution and do their diligence before investing generally, including in companies promoted on social media.”
The COVID-19 pandemic triggered a mass movement towards stock trading, which in turn has resulted in the current social media trading environment.
Robinhood, the US-based neo broker which has been under fire amid the GameStop trading frenzy in late January, is celebrating a massive adoption of cryptocurrency trading on its specialized platform, Robinhood Crypto. 6 million new customers have joined the ranks in the first two months.