In recent years, the rise of social media has given birth to a new breed of influencers, i.e. finfluencers – individuals who leverage their online presence to provide financial advice and guidance.
These “finfluencers” have gained a significant following, often with thousands or ten thousands, even millions of followers who trust their expertise in the world of finance.
However, the Securities and Exchange Board of India (SEBI) is not happy with what is happening with investors and tightening the norms for finfluencers so they do not share misinformation. But why is SEBI taking this strict step? Let’s dig deeper into the reasons behind these stricter regulations.
What are finfluencers? Why SEBI got triggered?
Before we discuss the reasons behind SEBI’s actions, let’s briefly understand who finfluencers are?
Finfluencers are famous individuals who use social media platforms like Instagram and YouTube to share their knowledge and opinions on various financial matters like advice on investing, managing personal finance, savings, taxation, and other related topics.
In recent time, their reach and influence have grown exponentially with the rise of social media usage and everyone started using too much internet in lock-downs. Many followers look up to these finfluencers for guidance and tips to make smarter financial decisions.
But not every finfluencer is right, there are many who just fool out to investors and make money from selling courses, earning money from video views, commissions from referring brokers, etc.
There are many cases we are seeing now as SEBI started curbing these unauthorized finfluencers.
For instance, there is a recent case of “Baap of Chart” where Mohammad Nasiruddin Ansari was noticed selling false educational training related to the securities market and allegedly giving stock recommendations through social media to investors, with a promise of guaranteed returns which is unethical to say.
Similarly, many such scammers got caught doing same activities where their P&L was showing negative returns, but they were showing themselves as highly successful traders.
That is a total fraud and scamming newbie investors and looting them showing just good things. This is where SEBI got triggered, and of course it is SEBI’s job to protect the interests of investors.
So, SEBI ordered Mohammad Nasiruddin Ansari to pay back Rs 17.2 crore, which he had made by allegedly misleading investors and influencing them to deal in securities.
SEBI’s role for investors and financial advisors (finfluencers).
1. The importance of investor protection.
SEBI’s primary role is to protect the interests of investors and ensure the smooth functioning of India’s securities markets. With the increasing influence of finfluencers, it is crucial to ensure that investors are not misled or given inaccurate information. This is particularly important because financial decisions based on incorrect advice can have severe consequences for individuals.
2. Curbing misinformation and false claims.
One of the key reasons behind SEBI tightening norms for finfluencers is to curtail misinformation and false claims. While many finfluencers provide genuine and valuable advice, there have been instances where individuals with limited knowledge or questionable intentions have misled investors. SEBI wants to eradicate such practices and create a more transparent and reliable environment for investors.
3. Promoting responsible financial advice.
SEBI’s aim is not to suppress or discourage genuine finfluencers who offer responsible financial advice. Instead, they want to promote responsible practices among finfluencers and ensure that investors receive accurate and well-researched information. The tightening of norms will create a framework that encourages finfluencers to provide reliable guidance and helps investors make informed decisions.
4. Stricter disclosure requirements.
Under the new norms set by SEBI, finfluencers will have to adhere to stricter disclosure requirements. They will be required to clearly disclose their association with any financial product or service they promote. This means that influencers will need to be transparent about any incentives or commissions they receive for promoting specific products. By doing so, investors can better assess the credibility and potential biases of the advice being offered.
5. Minimizing conflicts of interest.
Another important aspect of SEBI’s tightening of norms for finfluencers is to minimize conflicts of interest. By bringing in stricter regulations, SEBI aims to ensure that finfluencers prioritize the interests of their followers over personal gains. This will enhance trust in the advice provided by influencers and prevent potential manipulations that could harm investors.
6. Educating finfluencers.
SEBI intends to work closely with finfluencers to educate them about their responsibilities and the importance of providing accurate and unbiased information.
By organizing training programs and workshops, SEBI aims to nurture a community of knowledgeable and trustworthy finfluencers who can genuinely contribute to investor education and awareness.
SEBI’s decision to tighten norms for finfluencers is a step in the right direction to protect investors from misinformation and false claims. It ensures that the financial advice provided on social media platforms is reliable and unbiased. By promoting responsible practices and transparency, SEBI is creating a robust framework that benefits both investors and genuine finfluencers.
Ultimately, these regulations will contribute to a more informed and secure investing environment.