Finfluencers have gained significant popularity on social media platforms, using their public platforms to provide guidance and personal anecdotes on money matters and stock investments. However, with the rise in ‘unregistered’ investment advisors giving unsolicited tips and the manipulation of share prices through finfluencers, regulatory bodies like the Securities and Exchange Board of India (SEBI) have begun scrutinizing these influencers.
Why are they under SEBI’s scrutiny?
- Surge in Unregistered Investment Advisors: There has been a significant increase in the number of ‘unregistered’ investment advisors offering unsolicited stock tips on social media platforms. These advisors lack the necessary regulatory oversight and qualifications to provide financial advice, raising concerns about the accuracy and reliability of their recommendations.
- Manipulation of Share Prices: Certain companies have used social media platforms to manipulate their share prices through collaborations with finfluencers. This unethical practice raises questions about the authenticity of the information shared by these influencers and the potential impact on the stock market.
- Lack of Qualifications: The educational or professional qualifications of finfluencers to provide financial advice are often unclear. Without proper credentials, the accuracy and reliability of their guidance come into question, potentially misleading their followers.
- Digital Data Theft and Technological Risks: With the increasing risks of digital data theft and technological vulnerabilities, both listed and non-listed companies are prone to fraudulent activities. Finfluencers promoting investments without adequate knowledge or due diligence may inadvertently contribute to financial crises and ethical dilemmas.
New guidelines released by the Advertising Standards Council of India (ASCI):
- Disclaimer for Virtual Digital Assets (VDA) Advertisements: ASCI has released new guidelines for advertisements related to virtual digital assets (VDA). All advertisements for VDA products, VDA exchanges, or featuring VDAs should carry a disclaimer stating that these assets are unregulated and highly risky. It emphasizes that there may be no regulatory recourse for losses resulting from such transactions.
- Non-compliance by Social Media Influencers: ASCI’s half-yearly report of complaints highlighted instances where social media influencers were found to be non-compliant with its advertising guidelines. This report caught the attention of SEBI, leading to discussions on implementing guidelines specifically for content creators in the financial sector.
- Cautionary Advice from the Finance Minister: The Finance Minister of India recently urged people to exercise caution while following the advice of finfluencers. This acknowledgment from the government further emphasizes the need for regulation and accountability within the finfluencer community.
