The social media boom has led to the birth of many financial influencers who give out investment advice even if they are not qualified. Hence, SEBI is working on guidelines to regulate them.
In recent years, financial influencers or FinFluencers, have taken naive investors for a ride. They portray themselves as financial gurus and give expert advice. But, little did investors know that they were getting paid for providing such vague advice. In the end, the investor’s wealth is being eroded.
But, whenever things go wrong, SEBI comes to the rescue. Hence, SEBI is working on guidelines to govern financial influencers on social media.
What’s happening?
According to Business Today, financial influencers have more YouTube subscribers than new-age broking firms! Hence, many people look up to them for investment advice. Many new-age broking firms and platforms reach out to them for collaborations where they say they have used the product and they make money. This influence makes investors act in a certain way.
If you look around the internet, many influencers make videos showing whether or not they would invest in the IPO. Their impact has sometimes been detrimental, especially in some recent startup listings.
Many influencers give unsolicited stock tips on telegram groups as well. Sometimes, companies compensate influencers for advising about their stocks so they can manipulate the prices.
According to Moneycontrol, in 2022, there were 415 instances of violations by influencers and celebrities in finance and cryptocurrency related content.
Now, the question arises, is the situation the same across the world?
No, that’s not the case.
How has the US stock market regulator regulated social media influencers?
The US stock market regulator, the Securities and Exchange Commission (SEC), has already issued norms to keep investors safe from vague advice and maintain the securities market's fair functioning.
Not far ago, celebrity Kim Kardashian published a post on her Instagram account about the crypto asset security - EthereumMax website from where you can purchase EMAX tokens. Later, the SEC charged her for not disclosing that it was a paid promotion, and she had accepted $2,50,000 to endorse EMAX on Instagram. Later, the claim was settled by paying $1.26 million in penalties, disgorgement, and interest.
How will the new regulation affect investors?
As of now, the set of regulations have yet to be disclosed by SEBI. Once these regulations come into effect, many so-called FinFluencers might vanish in thin air. Moreover, disclaimers and SEBI registration may be made compulsory to secure investors and encourage fair practices.
What’s next?
The rise of financial influencers has been a dilemma for the market regulator, SEBI. Hence, it is making consistent efforts to secure the interest of investors.
Until the new guidelines are out, we investors must stay cautious and not invest based on some random FinFluencers advice.
