18th November, 2022 Economy
Disclaimer: Copyright infringement not intended.
- The Securities and Exchange Board of India (SEBI) is working on guidelines for financial influencers — popularly known as ‘finfluencers’ — who give advice to stock investors on various social media platforms like Twitter, Youtube, Instagram and Facebook.
Who are Finfluencers?
- Finfluencers are people with public social media platforms offering advice and sharing personal experiences about money and investment in stocks. Their videos cover budgeting, investing, property buying, cryptocurrency advice, and financial trend tracking.
- Some of these finfluencers have lakhs of followers with their investment advice being closely followed by millions of people across the country.
- There has been a sharp rise in the number of various ‘unregistered’ investment advisors giving unsolicited social media ‘stock’ tips on various social media platforms. There were also reports that certain companies used social media platforms to boost their share prices through such finfluencers.
- There is a concern about the eroding trust of retail investors against the backdrop of an increasing capital markets investor base.
- The rate of corporate frauds is increasing at a high pace. Scamsters are using this route of Finfluencers to manipulate share prices.
- Diversion of funds/ assets not only leads to erosion of wealth for shareholders, creates anarchy and financial crisis but also leads to ethical crisis and reputational risk.
- SEBI is considering ways through which such finfluencers can be brought under the regulatory net without trampling on any freedom of expression. At present, anyone giving out financial advice has to register as an investment adviser (IA) and comply with SEBI’s (Investment Advisers) Regulations. But finfluencers giving stock advice without IA licence.
- Monitoring social media isn’t very simple. However, SEBI is trying to find a solution whereby at least those who are cashing out by giving advice on social media are brought under the regulatory ambit.
- One solution is to check if the so-called finfluencers are forging any kind of a contract. It can then become easy to regulate them. Sebi’s main intent here is to prevent mis-selling and stock price manipulation.