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‘Be prepared to lose all of your money’: Retail investors warned to avoid hype

Ahead of screenings of a new film about the 2021 GameStop short squeeze, Australians will see a warning about the risks and regulatory perils of social media and market manipulation, part of a new ASIC campaign aimed at preventing 'dumb money' losses.

The Australian Securities and Investment Commission is warning retail investors against getting caught up in investment hype and market manipulation, using the Australian release of Dumb Money, about the social media-fuelled GameStop short squeeze, to get the message to the masses.

The regulator recently announced the consumer campaign, which will feature an advertisement airing nationally in cinemas before screenings of the film, about the January 2021 episode that saw retail investors pile into the GameStop stock to counter short positions held by hedge funds, ultimately pushing the share price up 2,000 per cent before it crashed in early February.

The campaign urges retail investors to carefully research online investment opportunities and suggests participation in speculative investment schemes, including share price manipulation via social media, could have financial and legal repercussions.

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

    The campaign emphasises that retail investors who use social media to drive stock prices up or engage in ‘pump and dump’ or other market manipulation schemes risk breaching Australian financial services laws. It noted that cryptocurrency scams and apps that seek to ‘gamify’ equities trading “remain on ASIC’s priority list”.

    “First-time investors should be particularly cautious and aware of the inherent volatility and complexities of market trading,” Day said.

    “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.”

    Day urged investors to “pause and reflect” prior to investing based on hype around a specific stock. “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 website, created by ASIC to provide education, online tools and other information to help people make financial decisions, also incorporates the campaign in its “Investment warnings” section, noting that investment hype often involves repeated messages of high earnings and relies on fear of missing out, trust and timing.

    It tells investors to understand what they’re buying by reading product disclosure statements and other key documents and to watch out for ‘get rich quick’ scams. And people shouldn’t rely on celebrities or influencers, who are often compensated, for investment information.

    “ASIC’s market surveillance team continually monitors market movements in real time and will take enforcement action where misconduct is identified,” the regulator stated, although it said it believes a GameStop-like short squeeze is unlikely to occur here due to Australia’s regulatory framework, exchange controls and market practice.

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