In the ever-evolving landscape of the digital age, the role of influencers has grown immensely, particularly in the realm of finance. Known as ‘finfluencers’, these individuals have been the subject of debate and discussion. Over the weekend, the Securities and Exchange Board of India (SEBI) took a significant step by releasing two consultation papers aimed at addressing this debate and regulating finfluencers who provide financial advice and education.

Sharan Hegde, Founder & CEO of The 1% Club, which runs a community to empower people to become financially independent, recently spoke to CNBC-TV18 to discuss the new regulations urging finfluencers to register if they want to work with regulated entities.

Hegde welcomed SEBI's move, stating, "It's a very big welcome move by SEBI to finally recognize finfluencers as an extension of knowledge distribution in this country. And it's a welcome move that unregulated finfluencers are not allowed to promote SEBI registered products."

He further elaborated, "Talking from a finfluencer's business point of view, it doesn't really impact us because 99 percent of finfluencers don't really promote SEBI registered products. What I mean by that is, let us say a specific stock or a specific mutual fund; 99 percent of influencers don't really directly promote that. It is just those 1 percent miscreants on platforms like Telegram who really put those fake screenshots, say that this stock is going to go up to this much amount and misguide investors. So, I think this is a welcome move by SEBI to stop that."

He went on to explain that, when considering the business perspective of finfluencers, the new regulation wouldn't have a significant impact because the vast majority, around 99 percent, do not actively promote products registered with SEBI.

Additionally, Hegde emphasised the need to recognise the diversity among finfluencers. While most focus on personal finance matters, it is the subset of finfluencers who provide direct recommendations for investing in individual stocks or trading strategies that require more stringent regulation. These influencers have a direct impact on people's real-time financial decisions, making SEBI's intervention a commendable step in his view.

SEBI's consultation papers are divided into two main areas. The first paper focuses on the payments associated with the financial advice and education provided by finfluencers. It examines the business model and the payments made by investors to registered investment advisors or research analysts.

The second paper delves into whether regulated entities, such as mutual funds and brokers, should establish partnerships with finfluencers.

For the complete discussion, please refer to the accompanying video.

(Edited by : Anshul)

First Published:Sept 8, 2023 5:58 PM IST