SEBI proposes to regulate ‘finfluencers’ for accountability and accuracy

Regulating finfluencers: surge in financial influencers, commonly known as finfluencers, who can charge up to Rs 7.5 lakh for a single social media post, has prompted SEBI to propose measures to regulate ir activities.

SEBI's proposal aims not only to ensure investors receive accurate and unbiased financial information but also to maintain aunticity and reduce fraudulent activities, according to Feroz Azeez, Deputy CEO of Anand Rathi Wealth.

Under proposed regulations, finfluencers would be required to register with SEBI and here to specific guidelines. Unregistered finfluencers may also face bans on partnering with mutual funds and stockbrokers for promotional activities.

While many finfluencers provide valuable insights, concerns have grown regarding unregulated individuals who might offer biased or misleing vice. Most of se influencers operate 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 ir followers," Azeez said.

ditionally, many finfluencers generate income from referral fees or profit-sharing for promoting products, channels, platforms, or services, or y receive compensation directly from social media and or platforms.

Consultation paper to dress associated risks

To dress risks associated with finfluencers, SEBI released a consultation paper proposing restrictions on registered intermediaries or regulated entities partnering with unregistered influencers.

In an age where financial vice is increasingly disseminated through social media, distinguishing credible vice from misleing information can become challenging. 

By requiring finfluencers to register with Sebi and here to specific guidelines, regulator is setting a standard for accountability and expertise in sector, Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS, said.

" regulatory move to dress role of financial influencers, or finfluencers in financial sector is undoubtedly significant in enhancing investor protection and promoting transparency in industry," Anand Rathi Wealth's  Azeez said.

Significant influence on followers

Finfluencers have significantly influenced ir followers' financial decisions in recent years, and SEBI's regulatory framework aims to make m accountable for vice y provide, stated Tejas Khoday, Co-founder and CEO of FYERS. se regulations could help prevent conflicts of interest and recommendation biases while striking a balance between regulation and innovation.

Khoday emphasised importance of harnessing digital media's power to increase financial awareness transparently and fairly without compromising social media's far-reaching impact.

Furrmore, SEBI has proposed creating a closed ecosystem for fee collection by SEBI-registered Investment visers (IAs) and Research Analysts (RAs) from ir clients. This closed system will help investors ensure ir payments reach only registered IAs and RAs, providing a safeguard against unregistered entities.

(With PTI inputs)