Why are finfluncers under the inspection of SEBI? Understanding finfluencers

The tagline of a front page advertisement in a business daily showing the face of a finflunecer (financial influencer) read, “Trust only the real experts”, along with the IT Ministry logo next to the YouTube logo has become big news and has gained sharp criticism. The critiques question whether the ad intended the endorsement of the skills of influencers, or a specific social media platform.

The advertising, however, does not directly relate to finfluencers, but the fact that it consisted of a picture of a famous financial influencer, Rachna Ranade, along with the IT Ministry logo, YouTube logo, and the tagline. However, at this time, SEBI is aiming to crack down on finfluencers.

On June 26, Minister of State for Electronics and IT, Rajeev Chandrashekhar expressed that the ad did not intend to endorse a platform or person. The Minister also says that since such advocacy ads can be often misinterpreted, a cautious use of Government logos in such campaigns by private platforms is what he advises.

Understanding finfluencers

Finfluencers are people who advise and share personal experiences regarding investment in stocks and money management through public social media platforms. The content that these finfluencers create talks about investments, budgeting, cryptocurrency advice, property purchasing tips, financial trend tracking, and more.

The reason behind the criticism of the ad

Finfluencers have attracted criticism from the investors' community, as they offer unsolicited tips on financial matters on multiple social media platforms sans getting registered as investment advisors. The SEBI is taking notes of all this and is trying to work out creating guidelines for such content creators in the financial sector. Not to miss, Finance Minister Nirmala Sitharaman's recent advice also warns and suggests the audience choose caution while abiding by the advice of such content creators.

Moreover, what attracts even more critical is that one cannot say if such influencers have any professional or educational backgrounds to provide financial advice to the populace. Plus, it is also unknown if there are any monetary benefits they are receiving for promoting such entities.

Some of these influencers have successfully attained lakhs of followers. It is obvious that if they have such a huge following base, millions of such followers may also be following their financial advice. What seems to be worrisome is the fact that scammers are making use of this method to manipulate share prices

Guidelines by other organizations

The Advertising Standards Council of India (ASCI), brought forward a set of new guidelines for influencers on social media regarding publishing ads surrounding virtual digital assets, cryptocurrencies, non-fungible tokens, and more. These guidelines are aligned with the government and RBI's stance on cryptocurrencies. According to the guidelines, all advertisements for VDA exchanges, VDA products, or featuring VDAs in anyways must carry a disclaimer saying, Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions."

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