'Vague and unclear!', finfluencers on ASCI's SEBI mandate

The finfluencer community has seen a meteoric rise in recent years, becoming one of the highest-paying sectors. Inevitably, many frauds and malpractice have also become commonplace with the success.

Finance Minister Nirmala Sitharaman had also advised social media users to be cautious and aware of who they are being influenced by. "Social influencers, finfluencers are all out there but a very strong sense of caution is required in each one of us to make sure we do double checking, counter-checking and don't go as a flock into something because somebody else is gone."

While the Union minister asked investors to do their due diligence, she said people need to remember that it is their “hard-earned money” and not just follow influencers blindly.

The government has now enlisted ASCI's (Advertising Standards Council of India) help to bring some kind of regulation in this highly unorganised sector.

The growing trend of financial influencers, commonly referred to as ‘finfluencers’, doling out half-baked financial advice, and risking the hard-earned money of their followers is the latest thorn in the government's side. SEBI had taken a stand to regulate the unorganized sector and bring a semblance of order.

In light of these updates, ASCI in its new guidelines has said finfluencers operating within the BFSI realm, can now offer investment-related advice only after being registered with the Securities and Exchange Board of India (SEBI).

Their registration number must be prominently displayed alongside their name and qualifications. For other financial advice, influencers must possess appropriate credentials such as a license from the Insurance Regulatory and Development Authority of India (IRDAI), be qualified as a chartered accountant, hold a company secretaryship, etc. Moreover, they are expected to adhere to all disclosure prerequisites as stipulated by financial sector regulators from time to time.

Disclaimer requirements for health and finance influencers

*The influencer must disclose their qualifications and registration/certification details prominently in all types of promotional material:

*Superimposed on the visuals prominently and upfront, or mentioned as the opening remark in videos

*For blogs or any text-based posts, they should be stated upfront before the consumer has to read the post

*In the case of podcasts or a purely audio medium, they should be called out at the beginning of the advertising content

It may be noted that on August 11, 2023, the Department of Consumer Affairs also extended its influencer guidelines to mandate additional disclosures while endorsing health and wellness products and services. Influencers found to be in violation of the guidelines could face penalties under the Consumer Protection Act (2019).

Finfluencers react

We reached out to some influencers as well as agencies that handle them exclusively to understand what they have to say on this.

Ankur Warikoo, Entrepreneur at WebVeda, Content creator at wariCrew

It is certainly something that is needed and it should have been done earlier, anyone giving financial advice which is which stock to buy, what mutual fund to buy or anything like that has to come with expertise and qualifications. I don’t think it solves the problem though, it fact may aggravate the problem because, if somebody does have a license, it shouldn’t become a license to kill, now that he/she is legitimized. For example, if there is somebody who is a bad actor and is registered at SEBI, how does that mean that they are giving good advice, and if they do give ‘bad advice’ what are the repercussions? It makes it harder for people to be able to give advice but it doesn’t still prevent somebody to give bad advice and that is where my fallacy with this approach is. It is one step at a time, without covering the final intent and the final intent is to prevent bad actors from giving advice.

Kunwar Raj, Finfluencer and Founder- Unfinance

ASCI's new rules are straightforward: if you're a financial influencer and want to offer investment advice, you need to be registered with SEBI. This is a good move. It will make sure that only qualified people give advice. This will protect consumers and make sure they get advice that is safe and trustworthy. It's important that we, as influencers, follow these rules.

However, there is a need for clearer guidelines. The rules should be precise and well-defined, so that there are no grey areas that can be exploited or manipulated. Clear rules will make it easier for influencers to understand and follow them, and will help protect consumers from misleading advice. We need transparency and accountability in this space, and that can only come with clear and strict rules. Let's work together to ensure that the digital landscape is safe and trustworthy for everyone.

Aditya Goela, CFA - Co-founder of Goela School of Finance 

This is a much-awaited rule that will be beneficial for end users. I just wish that the implementation of the above should be done in the right manner. Yes, there will be a slight inconvenience to the influencers, but at the same time, it's good for the long-term influencer industry as this will instil more confidence in influencers. The next step for the influencers should be to apply to be a registered advisor under SEBI. For experienced investors/traders, the certification is not all that hard to attain.

Vijay Nihalchandani, Finance Content Creator

It's not a surprising action. I believe it's been in the works for a while and conversations have been floating about such regulations being activated. I suppose the next step would be to gain more clarity on certain details of the regulation because they are very open-ended and understand how finance content creators can adopt them.

Ayush Shukla, Founder of Finnet Media

I think the guidelines are unfair plainly because there was no dialogue with the creators and the finance community. The whole thing is very vague and unclear, on what basis was this regulation made and who was consulted?

It's not clear about what certifications validate sharing what kind of financial information. It's an open-ended guideline. We understand the intent to protect the consumers but not at the cost of people who are building the creator economy. It's like pulling back the industry by 10 years. A disappointing news to hear and we hope that the ASCI reviews these guidelines and shares tangible data validating it.

Himani Chowdhary

I believe this rule was absolutely needed. The role of a finance influencer/content creator is not to provide investment advice but to educate the masses about financial concepts and laws.  Just like a health creator should not  recommend medicines to their followers. Because of two reasons- first, the health creator might not have the required licence to do so and second, each case is different and every individual's case has to be studied separately. I think some finfluencers who are recommending stocks and mutual funds on instagram, youtube and telegram needs to stop and I welcome this decision by SEBI.

Shavir Bansal aka Bekifayati

We appreciate SEBI's recent initiative as a positive stride forward. This measure has the potential to sift out fake finluencers who might be dispensing unreliable advice. SEBI's emphasis on official registration seems geared towards endorsing accountable financial educators. This move doesn't seem to impede genuine financial educators. By enforcing registration, the intent is to curtail the spread of misleading information by unverified influencers. This could significantly bolster the credibility of finance influencers, creating a more reliable space for our audience. Nonetheless, some uncertainties linger within the ‘finluencer community’. A transparent explanation of guidelines and expectations would greatly help in aligning our content with SEBI's vision. Publishing these guidelines would provide a clearer roadmap for influencers, ensuring content relevance while adhering to compliance.