SEBI’s proposal to prevent ‘Finfluencers’ from spreading biased financial advice

• The Securities and Exchange Board of India (SEBI) is taking action to regulate ‘finfluencers’ or financial influencers who provide financial advice without proper registration. 
• This move is in response to concerns about fraudulent advice and biased promotions. 
• SEBI aims to protect investors and ensure transparency in the financial markets.

Advent of Finfluencers 

There are lots of ‘finfluencers’ also known as financial influencers, on social media like YouTube, Instagram, and TikTok. 

They give financial advice without being officially registered.

Some of them genuinely want to help, but others might be promoting things for money, which can lead to biased advice. People have expressed their concern over this.

According to the ‘Guidelines for Influencer Advertising in Digital Media’ issued by the Advertising Standards Council of India, an ‘influencer’ is defined as someone who possesses the capability to reach an audience and influence their purchasing choices or opinions regarding a product, service, brand, or experiential aspect. 

Recent Events that fuelled SEBI’s Decision

P R Sundar, a renowned Indian financial influencer had been marketing different advisory service packages without being registered with SEBI.  

In May 2023, SEBI took action against the YouTuber and prohibited him from participating in market trading for one year.

SEBI mandated both him and his company, Mansun Consulting, to pay settlement and disgorgement fees due to their infringement of investment advisor regulations.

Not just that, but he had reportedly, endorsed Vauld, a Singapore-based crypto exchange. 

On 4th July 2022, the cryptocurrency trading platform halted customer withdrawal services. 

Its CEO, Darshan Bathija, attributed this decision to various factors, including market volatility, affecting approximately 800,000 investors.

Following this incident, in January 2023, the Indian Department of Consumer Affairs created guidelines for Celebs and Social Media Influencers. 

Also read: SEBI is now forbidding celebrities from endorsing cryptocurrencies

The Proposal

The rise of finfluencers on digital platforms has led to concerns about unreliable advice and potential conflicts of interest.

SEBI issued a consultation paper on 25th August 2023, to address the issue of unregistered finfluencers.

SEBI’s proposal includes:

• Instructing registered intermediaries to distance themselves from unregistered finfluencers using their name, products, or services.
• Preventing monetary or non-monetary associations between registered intermediaries and unregistered finfluencers.
• Requiring registered finfluencers to display their registration information and follow SEBI’s advertisement guidelines.

Public comments on the proposal are invited until 15th September 2023.

SEBI and the Advertising Standards Council of India (ASCI) are working to ensure that finfluencers that offer investment-related advice are registered, protecting investors from risks.

Click on this link for more details.

Can these measures taken by SEBI promote transparency in the financial markets in India? Let us know your thoughts.