SEBI Plans Regulations for ‘Finfluencers’

What’s in today’s article?

• SEBI (about, structure, powers)
• Finfluencers

Why In News?

• The Securities and Exchange Board of India (SEBI) is working on guidelines for financial influencers — popularly known as ‘finfluencers’.
• The SEBI move follows a sharp rise in the number of various ‘unregistered’ investment advisors giving unsolicited social media ‘stock’ tips on various social media platforms.

In Focus: Securities and Exchange Board of India (SEBI)

• It was established in April 1988 as an executive body and was given statutory powers in January 1992 through the SEBI Act, 1992.
  • It monitors and regulates the Indian capital and securities market while ensuring to protect the interests of the investors, formulating regulations and guidelines.

Members of SEBI

• SEBI is run by a board of directors, whose members include:
  • the chairman nominated by the Union Government
  • two officers from the Ministry of Finance,
  • one member from the Reserve Bank of India, and
  • five members who are also nominated by Union Government

Power of SEBI

• Quasi-Judicial
  • SEBI has the authority to deliver judgements related to fraud and other unethical practices in terms of the securities market.
• Quasi-Executive
  • SEBI is empowered to implement the regulations and judgements made and to take legal action against the violators.
  • It is also authorised to inspect Books of accounts and other documents if it comes across any violation of the regulations.
• Quasi-Legislative
  • SEBI reserves the right to frame rules and regulations to protect the interests of the investors.
  • Some of its regulations consist of insider trading regulations, listing obligations, and disclosure requirements.
  • Despite the powers, the results of SEBI’s functions still have to go through the Securities Appellate Tribunal and the Supreme Court of India.

Finfluencers

• They are people with public social media platforms offering advice and sharing personal experiences about money and investment in stocks.
• Their videos cover budgeting, investing, property buying, cryptocurrency advice and financial trend tracking.

Need to regulate finfluencers

• There has been a sharp rise in the number of various ‘unregistered’ investment advisors giving unsolicited social media ‘stock’ tips on various social media platforms.
• There were also reports that certain companies used social media platforms to boost their share prices through such finfluencers.
  • Recently, an online portal claimed that finfluencers get paid Rs 7 to 9 lakh per endorsement to push financial products on social media.
• There are two important aspects which requires attention:
  • It is unclear if these influencers have any educational or professional qualification to offer such financial advice, and
  • If there is any kind of monetary transaction that happens between them and the entity they are promoting.

Criticism against regulations

• Critics claim that finflencers render advice to their followers which comes under the ambit of Freedom of Expression of the Constitution.
• Followers are not forced to take action based on the recommendations of
• They point towards the fact that often celebrities endorse certain products without having any expertise. Also, they take money to promote the products. Thus regulating the finfluencers would be improper.