Mumbai: The Securities and Exchange Board of India (SEBI) has taken a decisive step by banning regulated entities from associating with unregistered influencers. This crackdown targets anyone who provides financial advice or makes claims about securities without Sebi's registration.
In today’s accessible digital world, to regulate the affairs in the financial sector finfluencers use platforms such as Instagram, YouTube, Twitter, and several mobile and gaming apps to spread their financial advisers, and investment ideas and even promote specific stocks or shares of certain companies for their (finfluencers’s) marketing and revenue point of view. These affect stock prices and investment choices of people by finfluencers but the problem is that often their data is basically unreliable information and actions are unaccountable because they are not licensed and not qualified.
Since the finfluencers are not licensed and not qualified, they mislead investors and put their money at risk, and involve themselves in stock manipulation by elevating prices of certain stocks by convincing their followers to buy them which increase the value of those stocks and in a ripple effects decrease the prices of stocks of rival companies thus degrading the integrity the status of the Indian financial markets.
Previously, The Advertising Standards Council of India (ASCI) has developed criteria for influencers who might affect people's purchasing and investing decisions. They further said that Influencers must offer clear and visible disclaimers in their text or video material if they accept any kind of remuneration from a business or product they recommend.
Indiantelevision.com reached out to industry experts for their opinion regarding this massive step.
Whoppl founder Ramya Ramachandran stated, “For any industry, giving half-baked information or having limited knowledge and claiming expertise is always incorrect because people trust that the information provided is well-researched and accurate. Influencers giving advice on health, finance, or food without the right qualifications is especially problematic. While some influencers take extra steps to thoroughly understand the brands they promote, many do not. This issue extends beyond influencers to celebrities who often endorse products they do not use. Media outlets also sometimes fail to perform proper due diligence.
It is particularly risky when influencers give advice without due diligence, as their followers might make significant financial or health decisions based on this advice. This is why there's a call for better monitoring and perhaps certification to ensure influencers are qualified to give such advice. Product reviews and testimonials should be clearly marked as personal opinions of the individual influencer.
To ensure transparency and quality, there should be protocols requiring only qualified individuals to discuss certain topics. This should apply across industries, including media houses, celebrity endorsements, and influencers. The entire ecosystem needs to be revised to maintain a high level of transparency and clarity.”
According to Media Care Brand Solutions director Yasin Hamidani, “The SEBI crackdown on finfluencers, prohibiting SEBI-registered entities from associating with unregistered financial influencers, is a necessary and timely measure aimed at safeguarding market integrity and protecting retail investors.
The rise of social media has given birth to a new breed of influencers who provide financial advice and investment recommendations. While many finfluencers are knowledgeable and ethical, the industry is also rife with misinformation and unqualified advice, leading to potential financial losses for uninformed investors. SEBI's stringent regulations are designed to curb these risks by ensuring that only qualified and registered individuals provide financial guidance.
This crackdown will have significant implications for the finfluencer community. Unregistered finfluencers will face challenges in monetizing their content through partnerships with SEBI-registered entities. This move may lead to a decline in the number of finfluencers who lack formal qualifications or registration, thereby raising the overall quality and reliability of financial advice available to the public."
He sheds some light for the retail investors, "For retail investors, this regulation brings a layer of protection. They can now be more confident that the advice they receive from SEBI-registered entities is credible and compliant with regulatory standards. This will help in making more informed investment decisions and reducing the risk of financial missteps caused by unverified recommendations."
He further continues, "Finfluencers need to adapt to this new regulatory landscape by seeking SEBI registration, if eligible, to continue offering investment advice. Alternatively, they can pivot their content strategy towards financial education, general market analysis, and personal finance tips that do not constitute direct financial advice.
SEBI's crackdown is a step in the right direction for ensuring the integrity of financial markets and protecting retail investors. While it imposes new challenges on the finfluencer community, it ultimately promotes a more trustworthy and reliable financial advisory ecosystem. Finfluencers who adapt to these regulations will likely emerge stronger and more credible, benefiting both themselves and their audience.”
Pulp Strategy founder & MD Ambika Sharma highlighted, “The recent semi-crackdown on finance influencers is a commendable move towards protecting consumer rights and ensuring a responsible digital ecosystem. In an era where digital platforms wield immense influence over financial decisions, it is imperative to address the misinformation that can mislead consumers and cause significant financial harm.
The finance influencer space has grown exponentially, with many individuals gaining substantial followings by sharing financial advice and investment tips. While some influencers provide valuable insights, there is a growing concern about the accuracy and reliability of the information being disseminated. The allure of quick profits and sensationalist claims often overshadows sound financial advice, leading many unsuspecting consumers astray."
From the brands and agencies perspective, she said, "Agencies and brands must exercise due diligence in selecting influencers to partner with, ensuring that these individuals have the requisite expertise and credibility. The onus is on agencies to conduct thorough background checks and verify qualifications before endorsements. Brands must prioritize consumer safety over promotional gains by aligning with influencers who uphold ethical standards and provide truthful information."
She continues further, "Social media platforms and digital content platforms must implement stringent policies to monitor and regulate content shared by finance influencers. This includes flagging and removing misleading information, promoting content from verified sources, and providing tools for consumers to report suspicious or false information. Platforms can play a crucial role in protecting consumers from financial misinformation.
Government intervention is crucial. Regulatory bodies must establish clear guidelines and regulations governing the dissemination of financial information by influencers, including defining qualifications, setting standards for disclosure of affiliations and sponsorships, and enforcing penalties for non-compliance.
Education also plays a vital role in empowering consumers to navigate the digital landscape safely. Financial literacy programs should be promoted to enhance the public's understanding of basic financial principles and the potential risks associated with following unverified financial advice.
In conclusion, the semi-crackdown on finance influencers is a positive step towards protecting consumer rights and ensuring a safe digital ecosystem. By working together to uphold ethical standards, promote accurate information, and educate consumers, we can create a digital environment that fosters trust, transparency, and financial well-being.”
