ASIC has today launched a consumer campaign to raise awareness of the risk associated with investment hype to coincide with the Australian release of Dumb Money, a new film about the GameStop short squeeze episode in 2021.
The campaign, which urges retail investors to carefully research online investment opportunities, includes a new cinema advertisement that will air nationally from today at screenings of the film.
ASIC Chief Executive Officer Warren Day said, ‘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.
‘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,’ cautioned Mr Day.
‘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,’ Mr Day added.
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.
ASIC’s market surveillance team continually monitors market movements in real time and will take enforcement action where misconduct is identified.
In January 2021, retail investors used social media (e.g. Reddit group WallStreetBets) to ‘short squeeze’ NYSE-listed GameStop to counteract short positions held by hedge funds. This large amount of retail buying saw GameStop’s share price rise by around 2,000% in January 2021, before losing most of these gains in early February.
ASIC believes this type of short squeeze is unlikely to occur to the same extent in Australia due to our regulatory framework, controls that the Australian exchanges have in place and market practice.