Who exactly are finfluencers?
Finfluencers, individuals with prominent social media platforms, have gained popularity for their expertise in providing financial advice and sharing personal experiences related to money management and stock investments. Through their videos, they delve into various topics such as budgeting, investment strategies, property acquisition, cryptocurrency guidance, and tracking financial trends.
Why are finfluencers under scrutiny by SEBI?
They have been criticized by the investors' community for offering unsolicited "stock" tips on social media platforms without being registered investment advisers. SEBI has acknowledged this issue and is currently developing guidelines for content creators in this sector.
Why has an advertisement featuring a finfluencer, with a tagline urging people to "Trust only the real experts," and displaying logos of the IT Ministry and YouTube, faced backlash online?
People on the Internet have raised concerns and questioned whether the ad is endorsing the expertise of finfluencers or a specific social media platform.
Despite not directly targeting financial influencers, the advertisement featured a YouTube playlist on online safety hygiene, including tips for identifying misleading content. However, the controversy arose due to the prominent inclusion of Rachna Ranade, a popular financial influencer, alongside the tagline and logos of YouTube and the IT Ministry. This occurred during a time when the Securities and Exchange Board of India (SEBI), the country's market regulator, is considering stricter measures against financial influencers.
On Monday (June 26), Rajeev Chandrasekhar, the Minister of State for Electronics and IT, clarified that the advertisement was not intended as an endorsement of any individual or platform. He emphasized that the use of government logos in such advocacy ads could be misconstrued, leading to the suggestion of more cautious utilization of these logos by private platforms.
The investor community has expressed concerns over the activities of finfluencers who offer unsolicited stock tips on various social media platforms without being registered investment advisers. Recognizing this issue, the Securities and Exchange Board of India (SEBI) is actively working on developing guidelines for content creators in the financial sector. Recently, Finance Minister Nirmala Sitharaman advised caution when considering the advice provided by finfluencers.
In many cases, it remains uncertain whether these influencers possess the necessary educational or professional qualifications to dispense financial advice. Additionally, questions arise regarding any potential financial transactions that may occur between them and the entities they promote.
A significant number of finfluencers have amassed a large following, with millions of people across the country closely following their investment advice. These influencers often post videos in English, Hindi, or a combination of both languages. However, there is growing concern over the misuse of this platform by scamsters who aim to manipulate share prices.
These fraudulent individuals take advantage of the influence and reach of finfluencers to promote misleading information or engage in market manipulation. This unethical behavior can have detrimental effects on share prices and ultimately harm unsuspecting investors. As a result, regulatory bodies and authorities are increasingly vigilant about monitoring such activities and taking necessary actions to prevent and mitigate any potential scams or market distortions.
Are other organizations closely monitoring finfluencers?
Yes, other organizations are also closely monitoring influencers and advertising practices. The Advertising Standards Council of India (ASCI) is one such organization that has taken steps to regulate social media influencers and advertisers, particularly regarding the promotion of virtual digital assets (VDA) such as cryptocurrencies and non-fungible tokens (NFTs).
In February of the previous year, ASCI introduced new guidelines specifically addressing the advertisement of VDAs. These guidelines align with the government and Reserve Bank of India's longstanding stance on cryptocurrencies. According to the guidelines, any advertisements related to VDA products, VDA exchanges, or featuring VDAs must include a disclaimer stating, "Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions."
The aim of these guidelines is to ensure that consumers are informed about the potential risks associated with VDAs and to promote responsible advertising practices in this space. By implementing such measures, ASCI seeks to protect consumers and enhance transparency in the promotion of VDAs by influencers and advertisers.
Earlier this week, ASCI published its semi-annual report, covering the period of April-September 2022. The report highlighted instances where social media influencers were found to be in violation of ASCI's advertising guidelines.
ASCI's report revealed that one of the prominent Bollywood actors was among those who allegedly violated the advertising guidelines by posting an advertisement for 'Beyond Life NFT'. During the period between April 2022 and September 2022, ASCI received a total of 781 complaints against social media influencers, with approximately 2 percent of these complaints being related to advertisements about financial instruments, primarily focusing on cryptocurrencies.
FAQs
Q. What is the penalty for financial influencers as per SEBI regulations?
A. As of May 27 of this year, SEBI imposed a fine of Rs 6.5 crore on financial influencer PR Sundar and issued a one-year market ban on him. These actions were taken due to alleged violations of investment adviser norms. Sundar, who is a Youtuber and options trader, has resolved the case by paying the imposed fine.
Q. Why is PR Sundar fined?
A. Apart from receiving criticism from numerous users on the platform due to his inappropriate and distasteful language, PR Sundar faced penalties from the Securities and Exchange Board of India (SEBI). Sundar was fined Rs 6.5 crore and subjected to a one-year trading ban for alleged violations of investment adviser regulations. These measures were implemented to enforce adherence to regulatory standards and uphold the integrity of the securities market.
As per the SEBI settlement order, PR Sundar and his wife Mangayarkarasi have been directed to pay Rs15.60 lakh each. The settlement order arises from two references received by SEBI, alleging that Mr. Sundar provided advisory services without obtaining the necessary registration from the market regulator.
Q.What is the net worth of PR Sundar?
A. Remarkably, over the years, Sundar has seen his trading capital soar to over ₹50 crore, with the trader asserting a profit of ₹20 crore from trading and other ventures in the previous year. Notably, his firm, Mansun Consultancy, was included in the Cause List related to the 'examination of unregistered investment advisory' last year.
During the fiscal year of 2022, Sundar's extraordinary earnings of Rs 21.60 crore overshadowed his F&O profit of Rs 14.06 crore. Sundar gained significant attention for his impassioned resistance against the Mark-to-Market (MTM) statement verifications, a pioneering project being tested by Sensibull, an innovative online trading platform.
Comments