China Regulators Ban Brokers from Hiring Social Media Influencers

Chinese watchdogs have reportedly banned brokerages firms from hiring influencers and arranging live streaming campaigns to attract new customers. According to a report published by Bloomberg, the China Securities Regulatory Commission notified companies that they wouldn’t be able to use these methods to acquire new customers.

The regulator argued that brokerages should maintain a level of professionality and objectivity when offering their financial products, avoiding using ‘sensational wording’ or ‘quirky outfits’ – something that it’s used through influencers in social media, according to the watchdog.

In fact, the government had deployed a massive campaign to keep a ‘healthy’ environment for safer development of the society and the economy, and it’s said that this maneuver could be part of it. “The latest move may have much bigger impact on securities firms with strong internet capabilities or aggressive client expansion strategies. Many of the influencers have no working qualifications and use exaggerated words to get the attention of customers, and that could lead to irrational investment behavior,” Liu Yiqian, an analyst at Shanghai Securities Co., told Bloomberg.

It’s also known that firms like Huatai Securities Co. and East Money Information Co. had been using influencers to attract more retail clients and encourage them to use their portfolio, which implies that the measure has a direct impact on them and in smaller brokerages.

China and Brokers’ Relationship

China had also been tightening controls about how brokers deal with retail clients. Finance Magnates reported that online Chinese brokerages that are licensed outside the country face the latest regulatory uncertainty. A central bank official said that all such platforms are operating illegally.

Several Chinese trading platforms are operating with overseas licenses and providing services to Chinese citizens. These brokers mostly provide trading services with Hong Kong or US-listed stocks to domestic Chinese investors. Moreover, many foreign trading platforms take clients from mainland China without holding any local license.