Sebi to curb finfluencers to help investors get unbiased info

New Delhi: The rise of financial influencers or finfluencers, who charge as high as Rs 7.5 lakh for a post on social media, introduced a new way for people to access and interpret financial information, and now they will soon come under the regulatory purview as Sebi proposed measures to curb their mushrooming numbers.

The proposed move by Sebi not only ensures that investors receive accurate and unbiased information but also helps in preserving authenticity and reducing fraud, Anand Rathi Wealth Deputy CEO Feroz Azeez said.

Under the proposal, finfluencers need to be registered with Sebi and adhere to specific guidelines. Also, it has been proposed to ban unregistered finfluencers from partnering with mutual funds and stockbrokers for promotional activities.

While many finfluencers provide valuable insights, there has been a growing concern over the potential risks associated with unregulated finfluencers who might offer biased or misleading advice. They usually work on a commission-based model. “Finfluencers charge as little as Rs 10,000 to as much as Rs 7.5 lakh for an individual post, excluding tax. Influencer marketing agencies quote as much as Rs 20 lakh for a campaign, plus taxes, to entice their followers,” Azeez said.

In addition, many of them make money from referral fees or profit sharing for promoting the product, channel, platform, or services or get compensation directly from social media and other platforms. To address the risk associated with finfluencers, Sebi floated a consultation paper late last month proposing 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 is setting a standard for accountability and expertise in the sector, Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS, said. “The regulatory move to address the role of financial influencers, or finfluencers in the financial sector is undoubtedly significant in enhancing investor protection and promoting transparency in the industry,” Anand Rathi Wealth’s Azeez said.

Also, the capital markets regulator has proposed measures on disrupting the revenue model for unregistered finfluencers and ensuring that they adhere to proper disclosure and disclaimer practices. This will help create a more accountable and reliable environment for investors seeking financial guidance, he said.

Finfluencers have significantly impacted their followers’ financial decisions in the last few years and thus Sebi’s proposed regulatory framework can make them accountable and responsible for the advice they provide, Tejas Khoday, Co-founder and CEO of FYERS, said.

Further, finfluencers registered with Sebi or stock exchanges or AMFI are expected to display their appropriate registration number, contact details, and investor grievance redressal helpline, and make appropriate disclosure and disclaimer on any posts.