In 2023, the financial literacy rate of adults in India was 27 percent – well behind the UK’s 67 percent, Singapore’s 59 percent and the US’s 57 percent, according to a report.
Researching on Google or YouTube or getting hold of a platform or resources that explain the meaning of complex financial terms in a pithy manner is quite a task. This is where financial influencers – known as finfluencers – come into the picture.
But who are finfluencers? Are they qualified to provide financial information or investment advice and simplify the meaning of financial terms? What are their objectives?
Chartered accountant Rachana Phadke Ranade, Ankur Warikoo, Anushka Rathod, Sharan Hegde and Pranjal Kamra are among those who have carved a niche for themselves on social media and other platforms. Kamra was the most followed finfluencer on YouTube with 5.66 million subscriptions. Ranade was second with 4.58 million subscribers.
Their popularity led a section of the people to follow them for financial guidance and not seek the help of investment advisors registered with the Securities and Exchange Board of India (SEBI).
Let us understand how this section of influencers achieved their popularity and the impact of guidelines introduced to control the spread of misinformation.
Finfluencers: Growing in popularity
The pandemic, when businesses suffered and the world was caged in, was a catalyst in the emergence of finfluencers. Stocks gained and with the arrival of Covid-19 in 2020, people became more cautious about their spending habits and started developing a healthy relationship with money.
With low financial literacy levels in the country, there was ample scope for influencers to enter the space.
SEBI reins in finfluencers
The proliferation of finfluencers took place in a largely unregulated manner. While many such influencers sought to promote financial literacy and help people make investment decision, there were others who saw it as an opportunity to make quick money.
That’s when SEBI decided to step in and put out norms that required all such influencers to register with the regulator as qualified investment advisors and research analysts. It has since started cracking down on those not following the guidelines.
Most recently, on October 25, SEBI banned Mohammad Nasiruddin Ansari, who has a strong social media presence on platforms like Telegram, YouTube and X, for providing investment advisory services without registration.
Popularly known as ‘Baap of Chart,’ Ansari was ordered to refund Rs 17.2 crore, which SEBI said was earned through illegal advisory services. According to the regulator, Ansari provided stock recommendations in the guise of educational training pertaining to the securities market.
Further, he convinced investors to enrol in his courses that were provided on the ‘Baap of Chart’ app. The courses were on investment strategies for the securities market. This was followed by guaranteeing a certain yet consistent profit, according to a report.
Once someone paid up to join the course, he or she became part of a private chat group where they would get ‘buy’ and ‘sell’ recommendations for stocks.
In May, SEBI barred PR Sundar, a YouTuber and options trader, from trading for one year. This was after complaints that Sundar, his company Mansun Consulting, and co-promoter Mangayakarasi Sundar provided investment advisory services without being registered with the regulator.
Sundar agreed to pay a settlement amount of Rs 46.8 lakh. This was followed by disgorgement of Rs 6 lakh including the profit earned from advisory services and the interest paid on it, CNBC-TV18 reported.
In the same month, finfluencer Gunjan Verma was let off with a warning by SEBI after allegations that she provided investment advisory services without any registration.
According to a report, a Telegram channel regularly disseminated information that was misleading. Those involved in this activity would buy shares of a company, convince subscribers to invest in the company, and once the stock price rose, they would sell the shares and rake in a neat profit. SEBI banned these entities that used the channel and imposed a fine of Rs 5.68 crore on them.
Imposition of guidelines: ASCI steps in
In August, the Advertising Standards Council of India revised its guidelines for finfluencers and health and nutrition influencers. The guidelines for finfluencers stated that influencers could offer investment-related advice only after getting registered with SEBI and they must display their registration numbers alongside their name and qualifications.
The disclaimer that influencers would need to display includes superimposing their qualifications, registration or certification details on visuals that are readable or upfront.
For other financial advice services, influencers are required to possess credentials or a licence from the Insurance Regulatory and Development Authority of India, or they must be qualified chartered accountants or company secretaries.
The revised guidelines were introduced when SEBI complained of influencers spreading misleading advice on investment and stock trading.
For blogs and text-based posts, the credentials must be highlighted upfront or in a manner that can be read by consumers. In the case of audio content, the details must be stated at the beginning.
SEBI: Tightening rules
On August 25, SEBI released a consultation paper on ‘Association of SEBI Registered Intermediaries/Regulated Entities with Unregistered Entities (including Finfluencers).’
According to the paper, influencers are “usually unregistered entities providing catchy content, information, and advice on various financial topics to their several followers.”
The regulations state that those who do not have a registration certificate from SEBI cannot give out advice as investment advisors or research analysts.
To qualify as a registered investment advisor or research analyst, the person must have the qualifications pertaining to the role and must have five years of experience in providing services on financial products, securities, or fund, asset or portfolio management.
Guidelines for IPOs
Moneycontrol conducted an investigation that revealed some finfluencers were approached by financial companies to put up content related to initial public offerings.
The finfluencers, not registered with SEBI, were asked to promote content without declaring them as ads, which was in violation of the rules set by ASCI. As per ASCI’s guidelines on IPOs, any content put out by financial companies needs to carry a disclosure label stating that it is an advertisement.
Influencers and content creators were being offered Rs 50,000 per tweet and Rs 1 lakh per video, according to Moneycontrol. Rates for creators specialising in writing about IPOs would increase.