AMF Warns against Unauthorized Firms Offering Alternative Investments

On December 20, France's financial market regulator, the Autorité des Marchés Financiers (AMF), warned its public against several firms offering a typical investment without given authorization. The regulator updated its blacklist of websites and entities that provide alternative investments to investors in France without authorisation. The agency recently identified a list of the new websites in the atypical investment category, including www.flaconseil.com, www.fla-conseil.com, www.sasinef.com and www.sa-sinef.com.

Since January, the AMF has added 25 websites to its lists of unauthorized entities offering investments compared with 78 for the entirety of 2020. This reflects a drastic decline in fraudulent offers in the miscellaneous asset area.

In 2017, the agency created this blacklist, which identified websites that were illegally offering diamonds as investments. So far, the regulator has added 360 authorized internet addresses to this list, in various categories such as livestock, wines or champagne, and more recently, luxury watches. The authority said that any offer to invest in miscellaneous assets must be registered with the agency in order to be marketed. The AMF recommends that investors seeking to invest in France must do so with financial companies authorized to do business in the nation.

The Disruption of Online Brokerage Trading

The announcement by the AMF comes at a time when the regulator recently released a report that confirmed a larger number of retail investors are investing with neo-brokers than traditional platforms. Millions of French and foreign investors now have mobile apps that allow them to trade stocks as easily as they share content on social media. In January, while about six million foreign investors downloaded a trading app, retail brokerages saw high average daily volumes for options and equity trades. Such an increase is in addition to more than 10 million young investors that opened new brokerage accounts in 2020. In early 2021, retail investors generated as much equity trading volume as hedge funds and mutual funds combined.

The trend has been spurred on by simpler design, cheaper trading and the simplicity and clarity of the brokers. Incidents, like the short squeeze of AMC Entertainment, GameStop and other heavily shorted stocks, have majorly promoted such a trend. Additionally, an increasing number of young people dare to trade on the stock market. This is seen through various social media forums and platforms that play a significant role in this area. Of course, the Covid-19 pandemic has contributed to a surge in interest as millions of young people suddenly found themselves with more time and extra cash on their hands.

Moreover, neo-brokers are becoming responsible for changing investment behavior. The focus is currently not on long-term investments methods like value investing and the buy and hold strategy, but has shifted toward the use of riskier methods. Investment methods like trading certificates and warrants are offered on most neo-broker platforms. As a result, there is a high risk that the rising popularity of new brokers will steer the stock exchange more towards a gambler’s platform and less a marketplace where company shares are traded seriously.