In the case of other financial advice, finfluencers must have appropriate credentials, such as a license from the Insurance Regulatory and Development Authority of India (IRDAI), chartered accountancy (CA), or a company secretaryship. Adherence to disclosure is a prerequisite
Mumbai:
The rise of financial influencers or finfluencers, who charge as high as Rs 7.5 lakh for a post on social media, introduced a new way for people to access and interpret financial information, and now they will soon come under the regulatory purview as Sebi proposed measures to curb their mushrooming numbers.
Of late, financial influencers have attracted increased scrutiny following cases of unethical trading practices in the stock market.
In the case of other financial advice, they must have appropriate credentials, such as a license from the Insurance Regulatory and Development Authority of India (IRDAI), chartered accountancy (CA), or a company secretaryship. Adherence to disclosure is a prerequisite.
The proposed move by Sebi not only ensures that investors receive accurate and unbiased information but also helps in preserving authenticity and reducing fraud, Anand Rathi Wealth Deputy CEO Feroz Azeez told PTI.
Under the proposal, finfluencers need to be registered with Sebi and adhere to specific guidelines. Also, it has been proposed to ban unregistered finfluencers from partnering with mutual funds and stockbrokers for promotional activities.
While many finfluencers provide valuable insights, there has been a growing concern over the potential risks associated with unregulated finfluencers who might offer biased or misleading advice. They usually work on a commission-based model.
“Finfluencers charge as little as Rs 10,000 to as much as Rs 7.5 lakh for an individual post, excluding tax. Influencer marketing agencies quote as much as Rs 20 lakh for a campaign, plus taxes, to entice their followers,” Azeez said.
In addition, many of them make money from referral fees or profit sharing for promoting the product, channel, platform, or services or get compensation directly from social media and other platforms.
To address the risk associated with finfluencers, Sebi floated a consultation paper late last month proposing to restrict the association of registered intermediaries or regulated entities with unregistered influencers.
In an era where financial advice is increasingly disseminated through social media, the line between credible advice and misleading information can become blurred.
By requiring finfluencers to register with Sebi and adhere to specific guidelines, the regulator is setting a standard for accountability and expertise in the sector, Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS, said.
Meanwhile, the Advertising Standards Council of India (ASCI) has made it mandatory for financial advisors or “finfluencers” to register with the Securities and Exchange Board of India (Sebi) and disclose their credentials in its revised advertising guidelines.
The ASCI circular on August 17, 2023, says this applies to all finfluencers working in the banking, financial services, and insurance (BFSI) sector offering investment advice.
In the press release, ASCI stated, “Influencers providing advice or promoting or commenting on merits or demerits related to commercial goods and services, banking, financial services, and insurance and health and nutrition, must have the necessary qualifications and certifications to provide such information and advice to consumers.”
The guidelines also state that all advertisements posted by social media influencers “must carry a disclosure label that identifies it as an advertisement”.
The new guidelines are in response to concerns about potential risks linked with misleading and deceptive advertising content within critical sectors like BFSI and health and nutrition products and services.
The guidelines, originally introduced in May 2021, were aimed at helping consumers identify promotional content and make informed decisions. The ASCI has now amended them to boost the transparency and safety of investors on digital platforms.
Further, financial experts possessing certifications from recognised institutions must clearly “disclose” their certified expert status and credentials.
These guidelines will be applicable whenever they disseminate information, endorse products or services, or make assertions about commercial goods and services.
Finfluencers, who counsel investors on stocks and mutual funds, must also prominently display their Sebi registration number and qualifications in adverts or on social media platforms.
Manisha Kapoor, CEO and Secretary General of ASCI, said, “Unlike celebrities whom consumers know the fields they belong to, consumers may not know which influencers have the necessary qualification and expertise to provide the right advice and inform them of risks.”
She added that these additional requirements should be followed to safeguard consumers.
“The regulatory move to address the role of financial influencers, or finfluencers in the financial sector is undoubtedly significant in enhancing investor protection and promoting transparency in the industry,” Anand Rathi Wealth’s Azeez said.
Also, the capital markets regulator has proposed measures on disrupting the revenue model for unregistered finfluencers and ensuring that they adhere to proper disclosure and disclaimer practices. This will help create a more accountable and reliable environment for investors seeking financial guidance, he said.
Also, the capital markets regulator has proposed measures on disrupting the revenue model for unregistered finfluencers and ensuring that they adhere to proper disclosure and disclaimer practices. This will help create a more accountable and reliable environment for investors seeking financial guidance, he said.