The Securities and Exchange Board of India (Sebi) indicated that they are working on forming some guidelines for ‘finfluencers’. However, such regulations could be effective only when the regulators have adequate technological framework for proactive real-time market surveillance capabilities, and in-house talent to assess such data into insights to take necessary consumer protection measures.
A financial influencer or 'FinFluencer', is a person who gives information and advice to investors on financial topics -- usually on stock market trading, personal investments like mutual funds and insurance, primarily on various social media platforms. They might be compensated by the business offering the product or service.
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Recently, on the sidelines of an industry conference, a senior official of the Securities and Exchange Board of India (Sebi) indicated that they are working in forming guidelines for ‘finfluencers’. They have reason to worry that such unregulated and unlicensed self appointed advisors are putting consumers financial investment at risk.
For the sake of transparency, and tracking all the influencers, one needs to assume that any code of conduct will also include all influencers from the mainstream media (TV, Print, Digital).
Almost every Indian business TV channel offers stock-tips. Many TV anchors run stock discussion or pure corporate results programs during trading hours, and are influential in their own right. Same argument can be made for those writing about specific companies in print or other digital media platforms.
Media-journalists (oxymoron ?), thanks to their “informant network”, might have access to inside news about the companies. Is there any code, importantly traceable and implementable, to check if they misuse such info - especially to influence financial outcomes - for their personal gain or to their employer ? With corporate ownership of media space increasing further, how does one sift content from lens if the media owner is benefiting from content promoted ?
But then, some of those influentials (or media elites) might even take umbrage with this very idea and claim that their “independence and constitutional right to work” will be impacted by such a (potential) regulatory code. While there has to be respect for independence of journalism, the sector cannot use that veneer to peddle content or commentary, that influence financial / investment decisions.
Global regulatory learnings
In Australia, finfluencers could face up to five years in jail, if they provide financial advice without a prior license.
The European Securities and Markets Authority has defined what constitutes investment recommendations, how to post those advice on social media, and has spelt out penalties for any breach.
Earlier this year, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) informed its consumers with a letter stating that “ among the financial influencers, who regularly and frequently post information and investment tips" and that there are "many self-proclaimed experts on the go" in addition to genuine experts.
Singaporean and Chinese regulators also have guidelines for FinFluencers. While, the Dutch Financial Supervisory Authority (Autoriteit Financiële Markten – AFM) did a research and published its findings saying; “There are only a few finfluencers who post neutrally and there is often a lack of transparency."
First Principles for a code of conduct :
Regulations could be effective, only when the financial regulators have adequate technological framework for proactive real-time market surveillance capabilities, and in-house talent to assess such data into insights to take necessary consumer protection measures. And importantly to carry ahead with regulatory provisions to hold such offenders accountable, quickly.
Hopefully, it starts with human values and self regulation. Well, let’s assume that it’s missing or defunct. And, moral righteousness!! Well that’s for another day.
So, the likely Code of Conduct
However, the larger challenge is this: With regulators (the executive) being one of the original Four pillars of democracy, can they effectively counter undue influence of one of the other original four pillars -- the traditional media?
With supervisory tech (SupTech), it seems possible. But the regulatory independence and supervisory will, to take such a step, as well as the political nuance of such a possibility, is as good as your guess.
— Dr. Srinath Sridharan is a Corporate Advisor, Leadership Coach & Author
Read his previous columns here
(Edited by : CH Unnikrishnan)
First Published: Dec 7, 2022 9:56 AM IST
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