“Hi, my name is Bettina. I’m 22 years old and I have a net worth of one million, forty-two thousand reais.”
For the last few weeks, millions of Brazilians have heard this line, often several times per day. As a pre-roll advertising campaign on YouTube, apparently directed at a massive target audience, tons of people have been confronted by the fresh-faced Bettina Rudolph and many have listened—out of genuine interest or passing curiosity—to her take on how she managed to become worth over BRL 1 million in just three years, beginning with BRL 1,520, using the investment tips from Empiricus Research, the company she now works for.</span></p>
<p><span class="embed-youtube" style="text-align:center; display: block;"><iframe class='youtube-player' width='1200' height='675' src='https://www.youtube.com/embed/FTlwS0qLKP8?version=3&rel=1&fs=1&autohide=2&showsearch=0&showinfo=1&iv_load_policy=1&wmode=transparent' allowfullscreen='true' style='border:0;'></iframe></span></p>
<p><span style="font-weight: 400;">The indiscretion of the advertisement and Ms. Rudolph’s outlandish boasts quickly led to droves of memes made by Brazil’s notoriously cutting and unforgiving netizens. The case soon became more than a laughing matter, however, with Brazilian Securities Commission (CVM) investigating Empiricus. Against the backdrop of the media frenzy is a debate about misleading advertisement in Brazilian financial markets and its effects on a country that already </span><a href="https://brazilian.report/money/2019/02/16/brazil-retail-investors/"><span style="font-weight: 400;">lacks retail investors and financial education.</span></a></p>
<h2>Possible, but extremely unlikely</h2>
<p><span style="font-weight: 400;">Of course, Ms. Rudolph’s story is not quite as simple as she let on in her YouTube sting. Speaking to newspaper </span><i><span style="font-weight: 400;">Folha de S. Paulo, </span></i><span style="font-weight: 400;">the investor conceded that she did not turn BRL 1,520 into BRL 1 million and that her investments were in fact backed up by a BRL 35,000 savings account given by her father. She also increased the amount of money she put in stocks over time. </span></p>
<p><span style="font-weight: 400;">Market sources consulted by </span><b>The Brazilian Report</b><span style="font-weight: 400;"> confirm that, theoretically, it is possible to obtain such a return. To achieve this result, one would need to put “all of one’s money in stock options, choose the best ones in each period, and not make any big mistakes. Otherwise, you’ll lose everything.” Again, it is possible, but highly unlikely for someone who lacks experience and is not a professional trader—which conveniently summarizes Empiricus’ target audience. </span></p>
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<p><img class="alignnone size-large wp-image-15042" src="https://brazilian.report/wp-content/uploads/2019/03/export-EunLM-1024x683.png" alt="stock market bettina rudolph empiricus" width="1024" height="683" srcset="https://brazilian.report/wp-content/uploads/2019/03/export-EunLM-1024x683.png 1024w, https://brazilian.report/wp-content/uploads/2019/03/export-EunLM-300x200.png 300w, https://brazilian.report/wp-content/uploads/2019/03/export-EunLM-768x512.png 768w, https://brazilian.report/wp-content/uploads/2019/03/export-EunLM-610x407.png 610w, https://brazilian.report/wp-content/uploads/2019/03/export-EunLM.png 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /></p>
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<p><span style="font-weight: 400;">It is true that the Bovespa benchmark stock index </span><a href="https://brazilian.report/money/2019/03/20/brazil-economy-stock-market/"><span style="font-weight: 400;">had strong returns since 2016</span></a><span style="font-weight: 400;">, which Ms. Rudolph listed as one of the reasons for her success in a subsequent video released by Empiricus. However, it is also true that the past three years have been a rollercoaster for Brazilian investors, who were faced with political instability, external shocks, and several “black swans”—what traders call unpredictable events that have disastrous consequences for markets—such as the JBS plea bargain deal and last year’s truckers’ strike. All of these factors greatly increased the chance of making the wrong call on the stock market. </span></p>
<p><span style="font-weight: 400;">It’s no wonder that expert investors were left outraged on social media. Renowned Brazilian fund managers, economists, and analysts joined the fight on Twitter, urging Ms. Rudolph to open up her portfolio and prove her profits. Some even used mathematics to demonstrate how unrealistic her gains are. </span></p>
<p><span style="font-weight: 400;">Samy Dana, an economist and TV Globo pundit, went as far as creating a model to show how rich Ms. Rudolph would be in 15 years’ time if she kept up her current pace. The results: an astonishing amount of BRL 157 quintillion, 2 million times greater than the GDP of the U.S. “Reflect on whether this could be true,” </span><a href="https://www.huffpostbrasil.com/entry/samy-dana-ironiza-bettina_br_5c8f954ee4b0d7f6b0f5fb58"><span style="font-weight: 400;">he told his followers</span></a><span style="font-weight: 400;">. </span></p>
<h2>Controversy and legal battles</h2>
<p><span style="font-weight: 400;">The outcry caught the attention of the Brazilian Securities and Exchange Commission (CVM), the agency that regulates financial markets in Brazil. It released a statement reiterating that Empiricus does not have permission to work as an investment analyst and said it is currently analyzing the company’s activities as part of an administrative lawsuit. It also urged investors to “avoid taking decisions based exclusively on opinions shared on the internet (…) and believing in investment offers through websites, followed by promises of quick and risk-free gains.”</span></p>
<p><span style="font-weight: 400;">However, so as to not feel left out of the social media ribbing, the CVM joined in with a meme of its own, portraying a wolf in sheep’s clothing who is “only trying to give you financial advice” and not selling a product—a not-so-thinly veiled dig at Empiricus. </span></p>
<p><span style="font-weight: 400;">However, some investors say it is far from enough, given the serious nature of Empiricus actions. And it would not be the first time the controversial research house, founded in 2009 by economists Caio Mesquita, Felipe Miranda, and Rodolfo Amstalden, has been in the spotlight for all the wrong reasons. </span></p>
<p><span style="font-weight: 400;">Empiricus has built its fame through controversial and aggressive marketing techniques. One such instance was its “The End of Brazil” analysis, published in 2014 following a massive advertising campaign. The report foresaw an economic crisis that would hit Brazil in the following years. The company was sued, accused of negative propaganda against then-President Dilma Rousseff, who sought re-election. Empiricus was victorious in court, however.</span></p>
<p><span style="font-weight: 400;">The content provided by Empiricus is always punchy, with headlines such as “Double Your Salary in Record Time” and “An extra BRL 251 every day in your account.” They use attractive arguments, such as “you’re about to learn the perfect strategy for someone who wants to wake up BRL 251 richer every day—without doing any extra work.” These advertising strategies often emphasize that there is no need for previous knowledge about financial markets, and that it is easy to reach such returns—all you have to do is read the strategy offered in the report subscription.</span></p>
<p><span style="font-weight: 400;">In Brazil, the CVM defines securities analysts as an individual or company that elaborates analysis reports for publishing. According to the CVM, “the expression ‘analysis report’ means any text, follow-up reports or analysis about specific securities or securities issuers that may help or influence investors in the process of taking an investment decision.” According to the agency, this comfortably defines Empiricus’ products. </span></p>
<p><span style="font-weight: 400;">Empiricus, on the other hand, </span><a href="https://oglobo.globo.com/economia/nao-respeito-cvm-como-regulador-desafia-socio-da-empiricus-23325038"><span style="font-weight: 400;">maintain that it is an editorial publisher</span></a><span style="font-weight: 400;">, which employs independent editors and “does not win or lose anything when publishing investment ideas.” Proving this is true, the CVM would not have jurisdiction to regulate it.</span></p>
<p><span style="font-weight: 400;">The company has lost the first round of the battle in court and therefore still displays the disclaimers demanded by CVM, explaining that past returns do not represent future profits, for example. </span></p>
<p><span style="font-weight: 400;">However, critics claim that their marketing style is very ambiguous. Ms. Rudolph’s YouTube spot doesn’t resemble any sort of traditional advertisement: Bettina isn’t explicitly selling any product, she merely stresses the benefits of investing in the stock market and presents her case as proof of it, trying to persuade others to join in. </span></p>
<p><span style="font-weight: 400;">Analysts side with CVM in this battle and some even think that the agency should be more proactive towards it. A fund manager, who asked to remain anonymous due to the sensitivity of the matter, told </span><b>The Brazilian Report</b><span style="font-weight: 400;"> that the “repercussions of the case tarnish the Brazilian capital market. It shows that our institutions are not ready to deal with this issue, because in a serious country, people would go to jail for this.”</span></p>
<p><span style="font-weight: 400;">Eduardo Guimarães, a stocks specialist at Levante Investimentos, disagrees with the argument that regulating marketing activities in financial sector would be an attack on freedom of speech. </span></p>
<p><span style="font-weight: 400;">“They are using legal opinions to put themselves above the law, saying they do not make investment analysis. When in fact they do. They also say that regulation is censorship, but this is an overstatement. Plenty of professions have their rules of conduct. There’s a difference between a tip and a supported recommendation. For the latter, you need a professional,” he told </span><b>The Brazilian Report</b><span style="font-weight: 400;">.</span></p>
<p><span style="font-weight: 400;">But apart from market regulations, the case has reached other agencies which aim to protect Brazilian consumers. The National Council of Advertising Self-Regulation (Conar) has </span><a href="https://www.jota.info/justica/bettina-conar-representacao-22032019"><span style="font-weight: 400;">opened up a case against Empiricus</span></a><span style="font-weight: 400;">. The Consumer Protection Office (Procon) has also asked the company to </span><a href="https://epocanegocios.globo.com/Marketing/noticia/2019/03/procon-sp-notifica-empiricus-por-propaganda-de-bettina.html"><span style="font-weight: 400;">provide clarifications</span></a><span style="font-weight: 400;">. </span></p>
<h2>Pioneering or reckless?</h2>
<p><span style="font-weight: 400;">With 325,000 paying subscribers and 1.8 million free content readers, Empiricus is indeed the biggest independent research house in the country. Many consider it a pioneer in the field, and for analysts, that’s precisely the problem of this case’s exponential proportion.</span></p>
<p><span style="font-weight: 400;">“We have poor financial education here, Brazilians invest very little in stocks. Then, when the person finally decides to do it, they encounter poor guidance, lose money and start to think that the market is only for specialists. It harms everyone,” says Mr. Guimarães.</span></p>
<p><span style="font-weight: 400;">On Twitter, the battle about Empiricus contribution to financial education rages on and opinions could not be more diverse. There are people saying the research house has changed the way they invest; others said they gave up on their subscriptions due to the aggressive marketing. There are also people claiming to have seen profits, others who said they’ve lost money.</span></p>
<p><span style="font-weight: 400;">Ms. Rudolph saw the social media buzz as an </span><a href="https://content.empiricus.com.br/felipe-bettina/?xpromo=XE-ME-GGL-IE-X-X-SH-B-X-WEPOST&_ga=2.250679046.1629126293.1553112093-1826909295.1553112093&_gac=1.123267833.1553202297.CjwKCAjw7MzkBRAGEiwAkOXexOllZJyGdUZ2ZJEcRuo3uYGxq9El14Pd0ZSMJw2MFO3JNZIH5_hwrBoCOhMQAvD_BwE"><span style="font-weight: 400;">opportunity to reach even more people</span></a><span style="font-weight: 400;">. “I’m very proud about this repercussion. Since when did Brazilians discuss if it is possible to get rich investing in stocks? I’m proud and excited about the future. Having more reach allows me to help more people.” </span></p>
<p><span style="font-weight: 400;">Since the video went viral, 1.1 million people subscribed to Ms. Rudolph videos, </span><a href="https://www1.folha.uol.com.br/mercado/2019/03/empiricus-consegue-11-milhao-de-inscritos-para-videos-de-bettina.shtml"><span style="font-weight: 400;">according to Folha de S.Paulo</span></a><span style="font-weight: 400;">. The company has released several videos about the repercussions of the case, opening up space for Ms. Rudolph to defend herself and also explaining the risks and rewards of stock markets. </span></p>
<p><span style="font-weight: 400;">Mr. Miranda also addressed the criticism towards the marketing strategy, claiming that “this posture is the only thing that makes it possible to spread the message on a large scale.” Empiricus was approached for this article, but a response has not yet been received. </span></p>
<p><span style="font-weight: 400;">Others do not think that more debate means a deeper or healthier discussion. “At the end of the day, the market loses credibility. And without it, you cannot have a market,” one investor said.</span></p>
<p><span style="font-weight: 400;">A week after the buzz, Empiricus launched a new web series, starring Ms. Rudolph. Called “Being a Millionaire with Stocks,” the series shows Ms. Rudolph’s brokerage trade confirmations while she tells her story, with the help of emotional arguments and a compelling soundtrack – but this time with lots of warnings. She promises that subscribers will receive even more content. By the time this article was published, the first video reached 157,000 views on YouTube. </span></p>
<p><span style="font-weight: 400;">Despite Ms. Rudolph’s pleas for viewers to share their stories, Empiricus disabled comments on the video.
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Bettina Rudolph
