Finfluencers ‘renting’ analyst licences for a fee after Sebi whip on advisory services

Many of the trader-trainers sell stock calls and tips through workshops and sessions, so they are essentially registered as training companies.

With the Chairperson of the Securities and Exchange Board of India (Sebi) saying that there is “something cooking” to stop unregistered investment advisors, the said advisors already seem to have found a way around.

Madhabi Puri Buch had said that in response to Moneycontrol's question on what it is doing to curb them.

Finfluencers are now ‘renting out’ research analysts’ (RA’s) licences for a fee, insiders told Moneycontrol. The ‘rent’ is around 20 percent of the fee they earn by providing stock tips and trading calls.

Finfluencers Moneycontrol spoke to said that they are settling for this because many of their applications are being rejected for various reasons, including lack of credibility, and also because RA regulations are highly restrictive.

Also read: SEBI is right in asking for higher ownership disclosure by FPIs, but what took it so long?

A person in the group of a widely followed finfluencer said that description of the group has changed to include an RA licence. The RA licence shows as being owned by another person, who hadn’t been shown as being associated with the finfluencer until now.

"A person without an RA licence can be hired by a company with an RA registration, but the advice has to be given under the licenced entity’s name," Rajesk K,  director of brokerage Alice Blue, said.

Currently, the finfluencers are citing an RA licence that they have ‘rented out’ but it is still the unregistered finfluencer, who is giving the advice, which is against the regulations.

Even to be working with a registered RA, a person has to have a post-graduate degree or a professional qualification and market experience of five years. Many of the finfluencers do not have this qualification, but as one of the finfluencers told Moneycontrol, “all of that can be bought in the market… if you want an experience for a job, you can reach out to an uncle, who runs a shop and ask for a certificate”.

Also read: Of furus, finfluencers and a frenetic rush for cover after Rs 6-cr whip on Sundar

According to finfluencers, there is no clarity on the regulations. Also, they said that RA regulations are highly restrictive and impossible to follow for hardcore traders.

Another big problem is that many of the finfluencers seem to lack credibility with the market regulator.

One of the bigger finfluencers, who did not want to be named, said that many of them have been trying to get an RA licence for the past few months but are being rejected because of a lack of credibility.

“Every finfluencer has broken at least one RA rule,” he said.

Also read: Finfluencer Gunjan Verma fined for offering investment advice without registration

Then there are other problems emerging. Many trader-trainers sell stock calls and tips through workshops and sessions, so they are essentially registered as training companies. This is done to get around the regulations that require registration to give investment advice. But that won’t work anymore.

“There is a company that tried to get a licence, but they are registered as a training-learning company with the Ministry of Corporate Affairs. So they can’t give advisory under that. Therefore, they have to set up a whole different company now and then apply for an advisory licence,” said this finfluencer, who did not want to be named.

This process could delay the registration by months.

The third issue is that live trading is the lifeblood of the finfluencer economy. A registered RA is not allowed this.

“First-time traders need handholding and live trading sessions. Without these, and the tips and calls, people won’t come for the workshops and classes,” said the finfluencer.