The emergence of financial influencers, often referred to as “finfluencers,” who can charge substantial fees, like Rs 7.5 lakh, for a single social media post, has introduced a new way for people to access and interpret financial information. However, in response to concerns about the potential risks associated with unregulated finfluencers providing biased or misleading advice, the Securities and Exchange Board of India (SEBI) has proposed measures to bring them under regulatory oversight.
SEBI’s Proposed Measures:
1. **Registration and Guidelines:** SEBI’s proposal entails the mandatory registration of finfluencers with the regulatory body. These registered finfluencers will be required to adhere to specific guidelines.
2. **Ban on Unregistered Finfluencers:** Unregistered finfluencers may face a ban on collaborating with mutual funds and stockbrokers for promotional activities.
Many finfluencers offer valuable insights, but there’s been a growing concern about those operating without regulatory oversight who often work on a commission-based model. Some charge fees ranging from as low as Rs 10,000 to as high as Rs 7.5 lakh for a single post, excluding taxes. Influencer marketing agencies, on the other hand, may quote up to Rs 20 lakh for a campaign, plus taxes, to attract their followers.
Additionally, finfluencers can earn income from referral fees, profit sharing for promoting products or services, or direct compensation from social media and other platforms.
SEBI’s Consultation Paper:
In response to these concerns, SEBI released a consultation paper proposing measures to restrict the association of registered intermediaries or regulated entities with unregistered influencers. In an era where financial advice is increasingly disseminated through social media, the line between credible advice and misleading information can become blurred.
By requiring finfluencers to register with SEBI and adhere to specific guidelines, the regulator aims to set standards for accountability and expertise in the sector. This move is seen as significant in enhancing investor protection and promoting transparency in the financial industry.
Furthermore, SEBI aims to disrupt the revenue model for unregistered finfluencers and ensure they adhere to proper disclosure and disclaimer practices. This will create a more accountable and reliable environment for investors seeking financial guidance.
Balancing Regulation and Innovation:
While these regulations are expected to prevent conflicts of interest and recommendation bias, it is essential to strike a balance between regulation and innovation. The goal is to harness the power of digital media to increase overall financial awareness transparently without compromising the wide-reaching impact of social media.
In addition to these measures, SEBI has proposed creating a closed ecosystem for fee collection by Sebi-registered Investment Advisers (IAs) and Research Analysts (RAs) from their clients. This will help investors ensure that their payments go only to registered IAs and RAs and avoid unregistered entities, which will be unable to access this closed ecosystem.
Overall, SEBI’s proposed regulatory framework aims to make finfluencers accountable and responsible for the financial advice they provide, enhancing investor protection and transparency in the financial industry.