The Securities and Exchange Board of India (SEBI) is working on guidelines for financial influencers — popularly known as ‘finfluencers’. The SEBI move follows a sharp rise in the number of various ‘unregistered’ investment advisors giving unsolicited social media ‘stock’ tips on various social media platforms.

 

Who are ‘finfluencers’?

They 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.

 

Need to regulate finfluencers

  • 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.
    • Recently, an online portal claimed that finfluencers get paid Rs 7 to 9 lakh per endorsement to push financial products on social media.
  • There are two important aspects which requires attention —
    • It is unclear if these influencers have any educational or professional qualification to offer such financial advice, and
    • If there is any kind of monetary transaction that happens between them and the entity they are promoting.

 

Criticism against regulations

  • Critics claim that finfluencers render advice to their followers which comes under the ambit of Freedom of Expression of the Constitution.
  • Followers are not forced to take action based on the recommendations of finfluencers.
  • They point towards the fact that often celebrities endorse certain products without having any expertise. Also, they take money to promote the products. Thus regulating the finfluencers would be improper.

 

About SEBI –

  • The regulator of Indian stock market, set up under the Security and Exchange Board of India Act, 1992 (as a non-statutory body set on 12 April, 1988 through a government resolution in an effort to give the Indian stock market an organised structure) with its head office in Mumbai.
  • The Board of SEBI comprises nine members excluding the chairman—one member each from the Ministries of Finance and Law, one member from the RBI and two other members appointed by the central government. It has four full-time members (including the chairman).
  • Functions of SEBI – Main functions/powers of the Board as per the SEBI Act, 1992 are –
      • Registering and stock exchanges, merchant banks, mutual funds, underwriters, registrars to the issues, brokers, sub-brokers, transfer agents and others.
      • Levying various fees and other charges (as 1 percent of the issue amount of every company issuing shares are kept by it as a caution money in the concerned stock exchange where the company is enlisted).
      • Promoting investor education.
      • Inspection and audit of stock exchanges and various intermediaries.
      • Performing other concerned functions as may be prescribed from time to time.