Finfluencer activity is a concern that needs to be tackled urgently in the securities market, according to Nithin Kamath, co-founder and CEO of Zerodha. Kamath, who is part of the Securities and Exchange Board of India's Secondary Market Advisory Committee, stated that one of the committee's responsibilities is to recommend measures for improving market safety, efficiency, transparency, and integrity.
During the first edition of the Moneycontrol Startup Conclave, Kamath emphasized the need for regulatory oversight over finfluencer activity in the long term, even if it may impact brokerages' associate partnerships in the short term.
Brokerages rope in influencers as associate partners to draw investors to their platforms and then share a portion of the brokerage with these influencers.
“There are already (Sebi) orders passed against some people and it (finfluencer activity) has reduced. But there is a lot of ambiguity around the regulations (for finfluencers) and they are working on that,” he said.
Speaking on how it could affect associate partnerships, he said, “In the short term, it (a regulation that curbs finfluencer activity) won’t be great for us but, in the longer run, it is needed. When people (investors) come into the stock market, they should come with the right expectations and some of the influencers have been setting them up with the wrong expectations, in that they can make money quickly and all that. That needs to be set right.”
Zerodha does due diligence into the influencers they rope in as associate partners, he said, adding that the brokerage has stayed away from anyone who blatantly provides stock advice without the Sebi registration.
Many finfluencers have raised the concern that there are fake Telegram and WhatsApp channels running in their names, and which provide stock tips and trading calls. They are concerned that they would lose partnerships with brokerages because of these imposters.
To this concern, Kamath said, that they should take legal action like filing a police complaint.
“It (channels or entities faking association) happens with us as well. Exchanges reach out to us and ask us if we have put out a promotional video, and anyone can make a video on Zerodha being the best platform, and we get a query asking if we paid this person to say this. Then we have to prove that there was no kind of association,” he said.
This would be a lot of compliance-related work, but he said they take it as “part of the game”.
“We are a regulated business, dealing with something as important as money… this is deal you get, you can’t (shy away from the responsibility),” he said.
Regulations, he believes, will stop “99 percent of this activity” of misleading finfluencer messaging.
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