Opinion SEBI orders on finfluencers: A bad influence

Financial influencers, or finfluencers, are those who provide financial advice and recommendations on social media platforms to investors. This category of influencers has gained prominence in recent years, more so during the pandemic, as retail investor participation in the markets soared during this period. However, the explosion in this category of influencers has brought with it a host of issues. It attracted a set of self-styled experts, with little knowledge of the workings and intricacies of markets. In their desire to gain eyeballs, to get people to subscribe for their services, and to monetise them, some of these influencers resort to exaggerated clickbait-y claims.

Following their advice has at times been to the detriment of novice investors. Concerns have also been voiced that these individuals, whose track record is often difficult to independently verify, have resorted to unethical means of pushing stocks down the throats of gullible investors. The incentive structures of these finfluencers, some of whom work on commissions, and their relationships with various brokerages, are also controversial.

The stock market regulator has been highlighting, and rightly so, the concerns surrounding finfluencers. It had issued a consultation paper with the objective “to restrict the association of Sebi registered intermediaries and regulated entities with unregistered finfluencers”. However, influencers can also play a role in the dissemination of financial education and advice to those not well versed in financial markets, products and services. Over the coming years, as the economy grows in size, as more and more individuals channel their money into the stock markets, ensuring the flow of accurate financial information, educating investors and ensuring their protection will be of critical importance.