Are Finance YouTubers Breaking the Law? #Finance

when i first started posting CashNews.cos to youtube about Finance and investing i was really nervous about accidentally providing investment advice on my channel if

you aren’t aware in canada the united states and many other countries around the world it’s actually legal to provide investment advice without being registered and while i’m now currently registered to give advice i wasn’t when i first started the channel and even still i

wasn’t interested in crossing that fine line but as i got more familiar with the youtube Finance space it became pretty clear that this concern was not shared by most

other creators not only were people openly talking about which stocks and Cryptos they liked talking about where they thought there were opportunities and whatnot but they were often times

telling people what exactly to do with their money invest in index funds sell out now before things crash buy dogecoin before it hits three thousand dollars that last one was actually from tick tock but you get the idea it was crazy it’s not that all the advice was necessarily bad or

speculative but the fact that so many people were giving advice in the first place without any issue was honestly mind-boggling how could this be how could all these people be doing what i was told was a cardinal sin in the color: #1a73e8; text-decoration: none;">Finance space then i saw it the apparent key to this onslaught of investment advice the not financial advice disclaimer virtually every popular text-decoration: none;">Finance CashNews.co posted on youtube has this disclaimer in one form or another including my own CashNews.cos mind you it’s kind of ridiculous when you think about it because most of the stuff is financial advice telling people how to invest their money

and what stocks to buy is clearly financial advice and while a lot of people fortunately do focus on providing reasonable guidance on youtube there are some in emphasis here on the sum who really do test the limits you can find some pretty awful advice on the platform from people providing

speculative picks that they think their viewers should go all in on to really just incomplete research only to wash their hands clean with a convenient by the way not financial advice but we haven’t really seen any penalties for people providing this sort of bad advice on youtube which raises

the question does the not financial advice disclaimer really protect people from any liability here for what they tell their viewers or all these youtubers breaking the law well as someone who lives both in the professional and the youtube world of

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance i wanted to further explore this topic so i did some digging spoke to an attorney and tried the best i could to see if we were on the cusp of the biggest crackdown in

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance youtube history or just another regular friday in the space now i do want to highlight on a beautifully ironic note that this CashNews.co is not legal advice since i am not a lawyer i have no formal legal

education i am just a Finance guy reading some rules online and while i will be focusing on u.s federal laws rules can obviously vary from country to country and even state

by state but nonetheless think that it will be helpful to dive into the laws for the biggest market in the world so that viewers can see if they have any protections here and so that youtubers can determine whether they should maybe be checking their phone books for any local law firms ladies and

gentlemen my name is richard coffin and you’re watching the plane bagel to answer the question of whether the not financial advice disclaimer is a real legal defense for youtubers we should first have a better understanding of the law around investing advice as it currently exists and

probably the most applicable law to this conversation is the investment advisors act of 1940 this was a piece of legislation introduced to the u.s after the wall street crash of 1929 which kicked off the great depression as many people believed that the market collapse was partially the result of

widespread speculation fueled by reckless advising from professionals it was said even taxi drivers and shoeshines would talk about which stocks they were trading that day the act essentially made it so that only registered professionals could provide investment advice while at the same time

outlining penalties for providing advice legally in fact under the act people who are not registered can be fined and may even face jail time of up to five years in federal prison if they provide illegal investment advice it can also open you up to civil liability if you illegally recommend a stock

to someone in that position declines you could be sued for the damages and given how many viewers some of these youtubers have that’s kind of a scary prospect but at the same time there’s got to be some leeway here right i mean people talk about stocks all the time and you don’t

see the sec going to water coolers at the office and finding your co-worker for telling you what their favorite picks were where’s the line here well in a 2013 memo the sec outlined three criteria for determining whether someone should be considered an investment advisor someone who if not

registered would be giving a legal advice we’ll start with the most obvious of the three provide advice to others or issue reports or analyses regarding Securities now importantly this line focuses on advice about Securities and not financial advice as a

whole so while the disclaimer not financial advice would include Securities advice and other types of money related things broader suggestions like you should save your money aren’t regulated here which makes sense in fact according to finra you don’t need to be

registered to even be a financial planner and virtually anyone can offer Financial Planning services so long as they don’t advise unregulated areas such as Securities and Insurance and other areas like that even still you can see how that

last part analyses regarding Securities is pretty damning for youtubers it sounds like even just analyzing the stock and giving your thoughts could constitute Securities advice and given how popular that is to do on the platform that could be an issue not only that

but the sec has been very broad historically with what i consider Securities advice so even just sharing a Portfolio of stocks or seeing something high level like you think people should have more stocks than Bonds would likely fall under this

criteria but there is an interesting caveat here that quite honestly saves a lot of people notice that the advice needs to be about Securities now you might be aware that Securities is a broad classification that includes many Investments like

stocks Bonds mutual funds exchange traded funds options and many other publicly traded Investments but interestingly the sec has in the past clarified that Real Estate coins precious metals and commodities are not covered by this definition and

while the sec does evaluate Cryptocurrencies and nfts individually they’ve ruled that bitcoin and ether the two largest color: #1a73e8; text-decoration: none;">Cryptocurrencies are not Securities and that explains a lot probably some of the most audacious advice on youtube has to do with bitcoin and none;">Cryptocurrencies and while we’ve obviously seen a lot of projects pop up that are trying to test the limits and the capabilities of the space there are also a lot of money grabs in the none;">Cryptocurrency area and it appears at this point of clarification would explain why it’s been so easy for people to skirt any liability regarding how these coins are marketed it’s not to say they can’t be found liable for things like fraud anyone can be sued for

promising returns or a pump and dump scheme but when it comes to advising about Cryptos it appears that for many of them it falls outside the legislation here so right away a lot of

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance youtubers can probably breathe a sigh of relief as they’re off the hook for their non-financial advice financial advice but for those that discuss stocks this criteria

still seems to apply so let’s move on to the next criteria to see if it applies you provide advice for compensation this is why the sec isn’t rating the wall street bets subreddit for all the hot picks being posted by users yet anyway because it appears that free advice falls outside

the scope here and that makes sense free speech applies even in the world of investing and the sec probably isn’t looking to police every free conversation we have about investing but it raises an interesting question are youtubers providing advice for compensation compared to a professional

advisor who would charge a pretty explicit fee for the service they offer a youtuber’s content is usually free with the youtuber instead being paid at times through advertisements or sponsorships that they decide to take on on their channel does that count well it’s a bit of a gray area

really but the sec has historically interpreted the compensation requirement pretty broadly to refer to any economic benefit regardless of how it’s received it doesn’t matter whether it’s paid directly by the person receiving the advice or not or even if the advice isn’t the

sole reason for the fee a benefit that’s generated in relation to you providing advice is considered compensation so there is a chance this criteria applies but i think the third and final criteria will help further clear this one up you engage in the business of providing advice and the sec

has clarified that quote generally a person providing advice about specific Securities will be engaged in the business unless specific advice is rendered only on a rare or isolated occasion that may be interpreted as meaning that someone who presents themselves as an investment

expert who regularly provides investment advice on their channel and whose investment advice is the reason that many viewers watch their content might meet this criteria but it’s hard to know for sure where that line is does calling yourself an analyst or a guru or some other title of

profession mean that you’re suddenly in the business of giving advice i honestly don’t know but i do think that the criteria is more likely to apply when you get into some of the many perks that youtubers in the color: #1a73e8; text-decoration: none;">Finance space like to offer if for example a youtuber runs a pay gated Portfolio of Securities or even one-on-one coaching sessions with their viewers there’s a chance this criteria would be met now

obviously between this criteria and the other two that we’ve already discussed we’ve already filtered out a lot of people from liability here but even with the not so clear four compensation rule i don’t think it’s a stretch to say that between the various donation and

pay-gated platforms there are likely some financial youtubers out there who have met these three criteria for being registered so why haven’t we seen a youtuber being sued for the advice they provided i knew that i needed some help to better understand what was going on here so i decided to

reach out to someone more familiar with us law than myself jack duffley is another financial youtuber on the platform who i learned works as a commercial Real Estate attorney in the us and while not a Securities law attorney himself he is more familiar with the

youtube Finance space and had actually written a blog post about this very subject so i decided to bug him and see what he thought about all this i passed the question on to

you as someone who actually has a legal background what’s going on here jack so the investment advisors act lays out a number of exceptions anyone who meets one of these exception classes would not have to register under the investment advisors act so they can actually give investment advice

in those limited cases first off we have to decide that yes they are getting paid for financial advice they meet that for compensation requirement so assuming that’s true which isn’t necessarily the case the biggest options would probably be either the the teachers or professionals

exemption that seems like it’d be promising but really the way the the sec has understood and the courts have understood the teachers exemption is that you really have to be a teacher first and then give financial advice as kind of like an outlet think maybe like a business school teacher um

not so much the person whose primary goal on youtube is to give financial content give financial advice and it seems like the publisher’s exemption is probably the best route which allows people to distribute certain publications and give financial advice through those without having to

register okay so i always knew that there were some exemptions for the act here it’s why you can have some professionals like Brokers and mutual fund salesmen who aren’t upheld at the same requirements as fiduciary advisors but i wasn’t as familiar with the

publisher’s exemption but also that one makes sense as well explains why you can have people on cnbc and other news networks sharing stock picks and never really facing any consequence for doing so but does this apply to youtubers i asked jack what it would take for someone to meet this

exemption it was clarified in a pretty big case actually all the way back in the 1980s called low versus sec and in this case this guy low used to be a registered advisor but he got in some trouble so he lost his registration status and then he started selling a newsletter where he was giving stock

tips or otherwise was giving financial advice and was getting paid for it through this newsletter they got all the way up to the supreme court in trying to figure out whether this guy had to register was he giving illegal unregistered financial advice and the supreme court said that this actually

fell under the publisher’s exemption so someone with a paid newsletter because it met these very specific three factors the publication is general and impersonal in nature it’s bona fide a or bona fide as we like to say in america and then the third is that the publication is general

and regular in its circulation so jack then i’ll ask the follow-up question of if you include this disclaimer say as kind of extra security and you assume that you’re protected under these exceptions as we saw in that low case is a youtuber able to say effectively whatever they want

about Investments do you have free reign to talk about anything on youtube when it comes to Securities i think it’s safe to say that you don’t have free rein like it’s you could just say whatever you want it can’t be advice that’s

geared towards a specific person so maybe a viewer comes up to a youtuber and says hey should i invest in this stock and then that youtuber tells that person yes you should invest in that stock specifically it’s like individual advice that probably wouldn’t be okay whereas the general

and impersonal newsletter might be okay and within the act there’s really nothing about a disclaimer saying hey if you do this disclaimer then you’re totally covered you don’t have to register to be an investment advisor it’s not really covered in the act so just because you

disclaim it and say hey this isn’t financial advice it doesn’t just absolve you of all of your sins if you really have sinned under the act and of course he did ask me to include this this is not legal advice i don’t know everyone’s individual situation this is really just

looking at a very high level overview of federal law all right so thankfully it doesn’t sound like youtube is a total wild west when it comes to Finances youtubers can

still be held somewhat liable for being dishonest with what they circulate and in fact while i was working on this CashNews.co the sec actually came out and charged a social media stock promoter for selling out of positions that they were promoting actively on their twitter handle big money mike vi

in his email group team billionaire not the most original names but it goes to show that there are cases coming out against predatory recommendations but regarding financial advice it doesn’t actually look like the not financial advice disclaimer is what’s doing the legwork here it

looks like that between the publishers exemption and that low case ruling from the 80s the law might not even apply in the first place after all advice on youtube is inherently being sent out to a mass audience so of course it’s not going to be considered personalized and if a paid newsletter

can skirt liability some paid youtube groups might even be in the clear here now jack did explain that it’s not to say the disclaimer may not be considered if the case were to make it to court especially in a situation where a youtuber is really towing that line of legality but as jack puts

it i always think that honesty is the best approach as long as you’re honest you’re not secretly saying hey uh i i don’t have an interest in the security but you actually do and then you end up selling it like a pump and dump type type thing as long as you’re honest

that’s step number one then we can kind of start looking at the next steps to make sure that you’re you’re in line with what the law is trying to do but i did notice that this does kind of set a weird precedent for stock picks in the space it obviously sounds like people

can’t provide personalized advice which makes sense because that does take caution and training and whatnot but they’re allowed to provide widespread advice to everyone even if it’s potentially bad now i know that no law is perfect and obviously there are still some protections

being provided here but it’s weird to think that saying tim should invest in this stock is not okay while saying everyone should buy this stock seems to be allowed under the publisher’s exemption regardless it looks like we’ve come to some sort of conclusion regarding the not

financial advice disclaimer there do remain some unanswered questions when it comes to signal groups 101 coaching and other more focused offerings like those but with or without this disclaimer youtubers don’t appear to be considered advisors under the law now this could change at any time

and perhaps we’ll see an interpretation that does bring more liability to the Finance youtube front but for now anyway that’s our understanding of the law now

obviously i’ve really gone in here on youtubers but of course these same concerns apply to major networks as well i also don’t want this to be interpreted as hate against any one financial youtuber who talks about stocks this is not an attempt to gatekeep investment analysis i think a

lot of people do a really good job with the content they put out but i do think it is fair to say that the worst of this bad advice when it comes to Finances can probably be

found on youtube which is why i discussed that platform specifically maybe tick tock is a contender there but you get my point and until the laws are changed it’s largely a viewer beware market so to end on a constructive note i think you should listen to what youtubers have been trying to

tell you their content is not financial advice it might not be appropriate for you or in some cases anyone so don’t copy their Portfolio don’t buy anything they tell you to unless it’s based on your own research you can learn a lot from not financial advice

financial advice but you shouldn’t take financial advice from someone not willing to be held to their word as for youtubers as jack says be honest both in terms of your own interests and your level of expertise and maybe avoid statements about absolutes regarding returns and how successful

certain Investments are going to be as we said plenty of times before only sith deals in absolutes thanks for joining me today i know this CashNews.co was a little different but i hope you did like it if you did please make sure to like and subscribe it does help the channel

tremendously and also check out jack’s channel he was a huge help in putting this CashNews.co together i’ll leave a link to his channel in the description down below i’d also like to pass a question on to you what do you make of all this do you think the system as it currently

exists is perfectly fine or do you think there should be more restrictions on the type of advice people provide online and if i have any legal viewers i’d love to hear your thoughts as well and if you think i’ve missed anything as i mentioned i’m not a lawyer not an attorney

hashtag not financial or legal advice and yeah i’d love to hear what people have to say about the rules that we’ve talked about thank you for joining me today and as always be safe out there