The Securities and Exchange Board of India (SEBI) has taken a decisive step in a consultation paper released on Friday. The paper suggests that regulated intermediaries should distance themselves from unregistered financial influencers, commonly known as “finfluencers.”
SEBI Public Input Sought on Restriction Proposal
SEBI’s consultation paper aims to gather public opinions on the proposal to limit the affiliation between regulated entities and unregistered “finfluencers.” The market regulator seeks feedback on this critical issue.
SEBI Defining “Finfluencers” and Their Impact
SEBI defines “financial influencers” or “finfluencers” as individuals who share advice and information on financial matters like securities investment, personal finance, banking products, insurance, and real estate investment via social and digital media platforms. These influencers possess the power to shape the financial decisions of their followers.
Stricter Regulations for Affiliations
According to the paper, intermediaries or SEBI-registered entities, including their agents and representatives, are prohibited from establishing any form of connection—financial or non-financial—with unregistered entities, including financial influencers. This is intended to curb any promotion or endorsement activities.
Mandatory Guidelines for Registered Finfluencers
SEBI’s proposal makes it necessary for registered finfluencers linked with SEBI, stock exchanges, or AMFI to prominently show their valid registration number and contact details. They must also share details about the investor grievance redressal helpline and include suitable disclosures and disclaimers in their posts.
Moreover, these entities requires to adhere to the advertising guidelines issued by SEBI, stock exchanges, and recognized supervisory bodies. Public comments on these proposals are welcome until September 15.
In addition to SEBI’s actions, last week, the Advertising Standards Council of India (ASCI) made changes to its influencer advertising guidelines, placing added responsibility on health and finance influencers.
These amended guidelines stipulate that financial influencers operating in the BFSI sector must be SEBI registered, while health and nutrition influencers endorsing products should possess relevant qualifications. Registration numbers must be clearly visible alongside their names and qualifications.
Influencers need appropriate credentials like a license from IRDAI, chartered accountant qualifications, or a company secretaryship for comprehensive financial advice.
The move towards stricter regulations extends beyond SEBI. The Ministry of Consumer Affairs earlier this year introduced new endorsement guidelines for social media influencers. Failure to comply with these guidelines could result in fines of up to INR 50 Lakhs.
The social media influencer market in India is substantial, with a value of INR 1,275 Crores in 2022. Projections indicate that it will grow at a CAGR of 19-20%, reaching INR 2,800 Crores by 2027. As noted by Department of Consumer Affairs Secretary Rohit Kumar Singh.
