Taking note of the rampant stock recommendations or financial advice by influencers or influencers on social spaces, the Security and Exchange Board of India has ensured guidelines for the regulation of such unsolicited advice. At an event organised by the CII conference on Corporate Frauds: Governance and Risk Management, Sebi Whole-time member S K Mohanty said, “SEBI is working on guidelines for financial influencers popularly known as fin-fluencers, who advise stock market investors on various social media platforms.”
The watchdog earlier warned investors not to rely on unregistered financial advisors, stock tips, and recommendations on social media platforms. This comes after the sharp rise of various unregistered investment advisors giving unsolicited social media stock tips on various platforms. Some reports also suggest such fin-fluncers artificially boost share prices through their content.
Many times such fin-fluncers lack a proper educational or professional qualification to offer financial advice. Sometimes there is a kind of monetary transaction between the financial advisors and the share they are promoting. The followers and subscribers of such influencers give confidence to the audience, hence millions of people follow their tips.
These content creators try to manipulate the share price with their tips and tricks. A fund manager tweeted that influencers are paid Rs 7-9 lakh per endorsement to push financial products on social media. SEBI chairperson Madhabi Puri Buch earlier hinted at curbing unsolicited recommendations on all kinds of platforms including Telegram and WhatsApp.
The market regulator has taken action against such organisations, and individuals, who violate the rules of the market. Without a proper framework and regulation, influencers advise investors under their sphere of financial literacy.
These financial advisors opine that they do not charge fees nor do they enter into contracts for investment advice hence are not liable under investment advisor regulations.
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