Caixin
Nov 09, 2021 04:01 AM
FINANCE

China Bans Livestreaming From Pitching Stocks and Brokerage Accounts

A livestreamer promotes products at the China International Import Expo in Shanghai.
A livestreamer promotes products at the China International Import Expo in Shanghai.

China’s securities regulator banned online influencers from recommending stocks through livestreaming and told them to focus on analysis of the macro economy and overall market when commenting on the stock market.

The China Securities Regulatory Commission (CSRC) issued the order as more and more brokerages and fund managers are collaborating with livestreamers aiming to attract new clients.

Livestreaming by financial institutions has been popular since 2020 as the brokerage industry shifted online amid the Covid-19 pandemic. Many brokerages have conducted wealth management festivals online and livestreaming carnivals. Livestreaming by such businesses itself is not illegal, but there are inevitable violations, an industry insider said.

There are two models of such collaboration. One is through providing account-opening links in the social media accounts of influencers, who collect payments from brokerages and fund operators. Even though payments are not based on the number of new accounts generated from these links, payouts are related to clicks and time of link placement.

The second model is through financial education. For example, some securities companies conduct livestreaming with well-known economists, providing money-management information, promoting companies’ products and commenting on the economy. Many livestreamers are also securities company employees, a person from a brokerage said.

Under Chinese regulations, securities companies are not allowed entrust other companies or individuals to engage in customer solicitation, customer service or product sales in violation of regulations. They may entrust individuals as securities brokers to conduct such activities, but the brokers must have securities practice qualifications.

The CSRC made clear that economists and other influencers are not qualified as securities brokers, and any incentives paid to them for bringing in new clients violate regulations. The regulator said it will punish any illegal activities such as insider trading and market manipulation through livestreaming “with no tolerance.”

The CSRC also said livestreamers’ comments on the market should be “objective and professional.” It’s forbidden to use vulgar, exaggerated or provocative language or headlines in livestreaming. Livestreamers also can’t wear bizarre clothes or select special locations just to attract viewers’ attention, the CSRC said.

To attract viewers, some livestreamers often make predictions on individual stocks’ future movements. A person from a mutual fund company said the company’s compliance department told its livestreamers not to recommend stocks or made judgments on market moves.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (hello@caixin.com)

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