Sebi vs ‘finfluencers’: Can regulator win?

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With the boom in equity markets sweeping India, the menace of self-proclaimed gurus has invaded the domain of investment advisers too. With the stock market regulator Sebi eager to crack down on this growing unregulated segment where a number of half-baked and downright charlatans are thriving, a report by The Economic Times has said that the market regulator’s efforts could miss its target.

Sebi has instructed all regulated entities to sever connections with any influencer who has not registered with it.

“We are very clear. If you wish to stay outside the purview of Sebi, we don’t have any problem because we respect your freedom of speech. But if you wish to deal with securities, or wish to partner with regulated entities, then you need to come and register with us,” Sebi chairperson Madhabi Puri Buch said at the Global Fintech Festival 2023 in Mumbai in September.

She said those words even as Sebi floated a consultation paper on August 25 that proposed to limit interactions between entities regulated by Sebi and unregistered ‘finfluencers’.

But industry experts think that Sebi’s well-intentioned move could leave no impact of a substantial chunk of these illicit influencers since their income is largely not dependent on any entity that has any links with the market regulator.

The self-styled gurus typically spread their message and tips on social media channels and even show fake P&L statements to their followers. They teach them trading tricks through expensive teaching courses. They organise webinars and workshops that generate revenue. They can even endorse specific investment platforms and buy software and other services in lieu of commissions.

Many also think that these finfluencers have contributed to expanding the market. During the boom in 2020-21, they have earned hefty amounts by engaging with brands. Influencers are known to earn as much as Rs 10 lakh for a single video, the report claimed. Brands are also known to pay heft “brokerage fees” to their partners who often source customers for them.

But industry insiders believe that Sebi’s stringent norms may repel many influencers. Even those who are not fraudsters and possess qualifications and skills can be put off at the thought of wading through the requirements and compliance.