Sebi strikes finfluencers: Can Sebi diktat protect investors from dubious investment advices on YouTube, Instagram, WhatsApp?

Sebi strikes finfluencers: Can Sebi diktat protect investors from dubious investment advices on YouTube, Instagram, WhatsApp?



Almost a year ago, markets regulator, Sebi, released a consultation paper on rules to limit the impact of ‘finfluencers’. Essentially, the thrust was on disrupting the revenue model of such finfluencers by prohibiting any association, monetary or non-monetary, between Sebi-registered intermediaries/regulated entities and unregistered entities (including finfluencers). Now, these rules have come into force.

Here’s what the new rule states: ‘The persons regulated by the Board and agents of such persons shall not have any association, like any transaction involving money or money’s worth, referral of a client, interaction of information technology systems or any other association of similar nature or character, directly or indirectly, with any other person who, directly or indirectly, provides advice or recommendation or makes any implicit or explicit claim of return or performance, in respect of or related to security or securities, unless permitted by the Board to provide such advice/recommendation/claim.’

What does this mean in practice? It implies that anyone who gives investment advice or recommendations, even implicitly, cannot receive any money or have any association with stock brokers or trading platforms and other market participants or any Sebi-regulated entity. It precludes even incidental association with such people or entities.

Sebi has delivered on the original promise of striking at the revenue model of finfluencers. However, when one looks at the wide expanse of finfluencing, I can’t help but feel that this will not make a big impact on the actual exposure that the unsuspecting public has to dubious advice.

To understand this, open YouTube or Instagram and search for a simple term that a beginner might use, say, ‘best stocks to buy now’. To get a ‘fresh’ view, use an incognito/private window. Watch a few of the videos or reels that come up, no matter how strange they may appear. Over the next few hours or days, watch what is thrown up by the algorithm of these services. You can’t help but notice that there is a huge number of finfluencers for whom the size of audience and other types of monetisation opportunities are enough. There are finfluencing channels with tens of lakhs of followers and whose videos invariably notch up lakhs of views. These people can make money directly from their audiences through advertising and other methods. They don’t need handouts from brokers.

To be fair, there’s a lot of good learning material on the Internet. In fact, this is one of the best things that has happened in recent years. It’s great how we are all sharing skills and knowledge online these days. Want to learn how to cook a great dish or style your hair or, clean your car’s air filter or grow mushrooms at home? A quick Internet search will have people showing you how to do it for free on YouTube. It’s amazing how much quality stuff is out there and, for a lot of everyday tasks, it works like a charm.However, while it’s great for quick, bitesized learning, it’s not always smooth sailing for more complex tasks. Sometimes, you need background knowledge to figure out if the advice is actually good. In some areas, such as health and personal finance, following bad advice can be really risky. Without a doubt, policing social media itself is too big a task for any hope of success and, in any case, there is a serious freedom of speech implication. However, cutting off the commercial link between finfluencers and Sebi-regulated entities is certainly possible.At this point, these are just actions that the Sebi Board has approved. Making actual rules and policing them will be a long story. Whether there is any real impact on what you see on the Internet will be an even longer one.

The Author is CEO, VALUE RESEARCH



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