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SEBI guidelines and financial influencers: Do ‘finfluencers’ and their content need regulations?

Impact of SEBI’s plans to regulate content created by financial influencers.

By  Tasmayee Laha RoyNov 20, 2022 1:59 PM
SEBI guidelines and financial influencers: Do ‘finfluencers’ and their content need regulations?
Many countries have strict guidelines in place when it comes to financial content creation. (Representational image via Unsplash)

The Securities and Exchange Board of India (SEBI) might soon have regulations in place for finfluencers. Finance content creators are not unhappy with the regulatory body’s move. A clear set of guidelines might come in handy for them, they said.

Popular finance creator Sharan Hegde who is also an ex-management consultant says regulations and guidelines should ideally define financial advice.

“The term financial advice is often misunderstood as anything related to finance. If we see global examples, China and Australia have already rolled out guidelines for finfluencers in their respective countries. They have clearly mentioned that financial advice is advice given to promote buying of shares in a company or units in an investment fund. If any finfluencer is doing this, they should be a registered investment advisor. But financial advice in general as most of us give covers a broader spectrum that includes tax planning, insurance, credit card, loans, planning for goal etc,” Hedge said.

According to Hedge, 95 percent of finfluencers in India give out general financial advice.

However, there might be exceptions too. Another popular face in the finance content space, Anushka Rathod, who is used to be an investment banking analyst, points out the irregularities and how regulations can put a check on those.

“There are people who have a following and they talk about direct stocks and levels when people should enter or exit based on fundamentals or technical analysis. Sometimes they even are paid for talking about certain stocks to just drive the prices up. Regulations will help in these situations because we want what’s best for our followers and retail investors. This is the only way to stay credible and relevant,” she told us.

Talking of direct products, SEBI already has a mandate for celebrity endorsers wherein celebrities are only allowed to speak about financial products at an industry level and not promote any particular scheme or product.

Global markets and guidelines

A Deloitte report says, globally, a lot of countries already have strict guidelines in place when it comes to financial content creation. The Financial Market Authority (FMA) of New Zealand, for instance, issued a Guide to Talking About Money Online in January 2021, to provide tips for both consumers and social media influencers engaging in related activities to better manage the risks.

“Introduction of regulations is a progress for this sector because it shows that the government is taking notice of the space, understanding its relevance and in a way acknowledging,” Ayush Shukla, Finnet Media

The same year, the European Securities and Markets Authority (ESMA) also issued a statement on Investment Recommendations Made on Social Media that contained a clear definition of investment recommendations, understanding of how to post them properly on social media, and laid out the consequences of breaching the EU Market Abuse Regulation.

Seven regulators from various sectors in China Mainland also jointly issued a consultation on the online marketing of financial products. The consultation clearly laid out regulatory requirements for online marketing of financial products through all online channels.

Earlier this year, the Australian Securities and Investments Commission issued an information sheet for social media influencers where they pointed out examples of potential violations and all the relevant laws that apply to the genre.

Many are seeing the SEBI move as a cleansing mechanism.

Weed out bad advice

“The intent is important and in this case it works in favour of creators who are doing it the right way. There are bad apples and there are good apples. So this was a much needed move. It will help in cleansing the space,” said Ayush Shukla, founder of talent management agency Finnet Media that also handles popular finance content creators.

“The term financial advice is often misunderstood as anything related to finance… But financial advice in general as most of us give covers a broader spectrum that includes tax planning, insurance, credit card, loans, planning for goal etc,” Sharan Hedge, financial influencer

Shukla also says a lot would depend on what the actual regulations would be.

“We hope that it isn’t too strict. Introduction of regulations is a progress for this sector because it shows that the government is taking notice of the space, understanding its relevance and in a way acknowledging it,” he added.

Influence of finfluencers

Influencers in India have often been criticized for promoting crypto currency and other high-risk financial products.

Gautam Madhavan, CEO at influencer management agency Mad Influence told Storyboard18 that regulations will help the influencers to be more responsible as they have followers in millions who invest in the various financial products based on the advice they receive from these influencers and one small misinformation can lead to a loss of their hard-earned money.

“The power of social media is that it is a free forum, but such regulations must be enforced regularly to ensure that these platforms are not exploited as a site of misconduct. As an industry, we will embrace these guidelines and eagerly await the final draft,” he said.

The regulations, according to Madhavan, should ideally make it mandatory for every fininfluencer to put a disclaimer on their content and call it a pure advice that comes with its own set of risks.

First Published on Nov 18, 2022 3:55 PM