Referral link is advertising, finfluencers must disclose Sebi registration details to host them: ASCI’s CEO 

ASCI CEO Manisha Kapoor said that their self-regulation guidelines and code of conduct outline clear expectations for advertisers and influencers alike.

Referral links or affiliate links that finfluencers host for brokerages will qualify as advertisement, according to the Advertising Standards Council of India (ASCI).

Therefore, even finfluencers who host referral links will be expected to follow the additional guidelines issued by ASCI on August 17, which said that those who provide information or advice on stock or investments will require a Sebi registration and will have to disclose their registration details upfront.

Anyone who does not voluntarily comply will be reported to the Securities and Exchange Board of India (Sebi), said Manisha Kapoor, CEO and Secretary General of ASCI, in an email interview with Moneycontrol.

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ASCI, a self-regulatory industry body, cannot enforce its guidelines, but it can alert the relevant authorities to initiate action.

What are referral links?

Referral links or affiliate links are used by finfluencers to channel clients to broking platforms, and they are rewarded with a percentage of the brokerage fee earned from these clients.

In an interview with Moneycontrol, Kapoor said: “When a material connection exists between an influencer and an advertiser, such as referral links or affiliate links, it qualifies as an advertisement and requires a disclosure (of Sebi registration in the prescribed format). This connection encompasses more than just monetary compensation. If any form of value is exchanged to promote or discuss the advertiser's offering, disclosure is essential and falls within our purview.”

According to the ASCI guidelines, “A material connection is any connection between an advertiser and influencer that may affect the weight or credibility of the representation made by the influencer. Material connection could include, but is not limited to benefits and incentives, such as monetary or other compensation, and free products with or without any conditions attached, including those who receive unsolicited, discounts, gifts, contest and sweepstakes entries, trips or hotel stays, media barters, coverage, awards, or any family or employment relationship, etc.”

Kapoor said that the updated guidelines prioritise transparency and investor safety on digital platforms, and they align with the market regulator’s view that finfluencers register with Sebi before offering financial advice. She added that if the influencer does not comply with the guidelines, ASCI will escalate such cases to Sebi.

How should disclosures be made?

The guidelines say that disclosure of qualification and registration/certification details must be done prominently. They should be superimposed on the visuals prominently and upfront, or mentioned as the opening remark in videos; for blogs or any text-based posts, they should be stated upfront before the consumer has to read the post; and for podcasts or any pure audio medium, they should be called out at the beginning of the advertising content.

What if advertisers do not comply with the updated guidelines?

Many brokerages do not consider hosting referral links as advertising, and, therefore, do not insist that their referral partners follow the advertising code released by the National Stock Exchange of India on February 2, 2023.

Also read: Referral 'partner’ of leading brokerages accused of editing P&L for online traffic; brokerages largely noncommittal

They continue to have content creators who violate these guidelines in various ways—such as using superlative terms, promoting a scrip or making exaggerated/deceptive/ambiguous statements—as referral partners. But the brokerages may need to reconsider this approach, given ASCI's view on their updated guidelines.

Kapoor said that their self-regulation guidelines and code of conduct outline clear expectations for advertisers and influencers alike. “If advertisers, brands, or influencers violate these codes, we will ask them to voluntarily withdraw the ad in question,” she said.

The spurt in advertising on digital platforms has placed new challenges for ASCI, she said. “The sheer volume of ads, coupled with their shorter campaign durations, presents a daunting task for effective monitoring… one out of every four ads processed in FY 2023 exhibited violations by influencers, with the digital medium accounting for 55 percent of the violations in FY22,” she elaborated.

Therefore, the council has now embraced AI-based monitoring. “Collaboration with government entities in handling non-compliant parties would significantly bolster consumer protection in advertising,” Kapoor added.