Explainer: What SEBI’s proposed rules for finfluencers mean for retail investors
SEBI) seeks to curb the association of registered intermediaries and regulated entities with such influencers to safeguard investors from any material risks and losses.
The capital market regulator has been talking about finfluencers and the potential risks they pose by intervening in the investment decisions of investors at various forums.
So let’s understand a bit more about “finfluencers” and the regulations proposed by SEBI to mitigate their influence on Dalal Street investors.
Who are Finfluencers?
As per the ‘Guidelines for Influencer Advertising in Digital Media’ released by the Advertising Standards Council of India, an ‘influencer’ means someone who can affect
such audiences who purchase decisions or opinions about a product, service, brand,etc.
because of the influencer’s knowledge, position, or relationship with the audience.
In recent times, the activities of finfluencers have attracted wide public and media attention.
Finfluencers have attracted wide attention from investors through their stories, messages and videos on various social media platforms such as Instagram, Facebook, YouTube, LinkedIn, Twitter, etc.
However, many of these are not registered with SEBI or any other regulated entity and don’t have the license to promote products or offer investment advice to investors.
Finfluencers Business Model
Several finfluencers, through various social media platforms, have been directly or indirectly promoting products, giving stock recommendations, in return for some fee.
They charge a referral fee for usage of the product, channel, platform, or services that they advertise, and the commission may be in an upfront or trail manner.
Some also offer non-cash benefits such as free usage of their products or services.
