SEBI to issue regulations for finfluencers: How do the steps come into play?


A set of regulations for financial influencers, or finfluencers, who offer unauthorized financial assistance on social media platforms like Twitter, Youtube, Instagram, and Facebook is being developed by the Securities and Exchange Board of India (Sebi). Owing to a dearth of guidelines and rules, influencers tend to furnish their followers and subscribers with a set of financial recommendations on many social media channels without a licence. Santosh Kumar Mohanty, a full-time member of the Securities and Exchange Board of India, responded by saying, “The market regulator is working on guidelines for those providing financial advice on social media platforms.”

How will the decision by SEBI protect consumers?

Ms. Nehal Mota, Co-Founder & CEO – Finnovate said “Money and Health are two areas of our life that have a lot in common. In both the gap between what we know and what the experienced practitioners know is very vast. And to cover up this gap, we often turn to information online – videos, or articles written by either websites or self-described experts. Finfluencers are to financial advice what Heath websites are to managing illness. They are good to consume as long as one is not treating oneself based on the advice one receives online. Because of lack of regulatory oversight in the internet / social media world, anybody can give advice – which makes the world of finfluencers – a mixed bag. Ranging from the unqualified to the super experienced, but consumers are left to figure out for themselves which is which. SEBI-registered entities on the other hand are like trained doctors. They have experience and have got a certificate to practice after a rigorous evaluation process. SEBI’s move to regulate Influencers is like asking all health writers to get at least a basic medical qualification. Yes, the advice might still vary from person to person, but at least consumers know that the person is qualified to provide advice. This is the reason this decision by SEBI to regulate finfluencers is welcome. It protects the consumer.”

How is the decision by SEBI to regulate Fininfluencers?

Ms. Nehal Mota said “Ideally, only SEBI-registered entities should be permitted to put out financial content on social media channels. Just having reach or vanity numbers doesn’t qualify you to advise on investments.Secondly, Financial influencers should be asked to get a license from SEBI similar to what other registered entities have to. Comply with networth requirements which will ensure not anyone can set up shop quickly but be invested for the long term, they should be asked to match the educational qualifications, experience, expertise and certification like that of registered entities. Lastly, if Finfluencers receive any monetary compensation from product originators or brokers, it must be disclosed along with the payment amount. That is a good starting point for regulating Finfluencers.”

How do these guidelines come into play?

Mr. Sharan Hegde, Finance Creator, Finance With Sharan said “The guidelines are welcomed as it will bring immense clarity in what fin-fluencers can talk about. While the creative process remains uninterrupted, it will surely help in identifying and strengthening the reliability of content. With SEBI coming into the picture, branded content driven by influencers will no longer just be a promotional tool, it will progress to become a more awareness driven and holistic channel of marketing. It will be interesting to see how these guidelines come into play, according to me, the foremost step should be to define ‘financial advice’ – this will help creators curate content which limits any illegal promotion while bringing more transparency in the system.”

Mr. Ayush Shukla, Creator & Founder, Finnet Media said “Finance influencers are gaining momentum, which also means there’s a lot of conversation on what finance influencers can talk about and what should be avoided, a lot of creators somehow are missing out on legal aspects of conversations and that’s where the guidelines will come into play. The guidelines will help ensure transparency and accuracy in conversations. Globally, guidelines have been in place for correct usage of social media. This step by SEBI will be welcomed by the fin-influencer fraternity as this also makes us believe that the government recognises the importance of content creators and is working towards making influencers a trustworthy source of information. However, it will be interesting to see what these guidelines are, after which we will have more clarity on how it works.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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