A strike at the finfluencers

Almost a year back, markets regulator SEBI released a consultation paper on rules to limit the influence that 'finfluencers' wield. Essentially, the thrust was to disrupt the revenue model of such finfluencers by prohibiting any association, whether monetary or non-monetary, between SEBI-registered intermediaries/regulated entities and unregistered entities (including finfluencers). Now, those rules are here.

The new rules say that 'The persons regulated by the Board and the agents of such persons shall not have any association, like any transaction involving money or money's worth, referral of a client, interaction of information technology systems or any other association of similar nature or character, directly or indirectly, with any other person who, directly or indirectly, provides advice or recommendation or makes any implicit or explicit claim of return or performance, in respect of or related to security or securities unless permitted by the Board to provide such advice/ recommendation/claim.'

What does this mean in practice? It means that anyone who gives investment advice or recommendations, even implicitly, cannot receive any money or have any association at all with stock brokers or trading platforms and other market participants or any other SEBI-regulated entity. It precludes even incidental association between such people or entities.

As far as this change goes, SEBI has delivered on the original promise of striking at the revenue model of the finfluencers. However, when one looks at the range of finfluencing going on, I can't help but feel that this will not make a big impact on the actual exposure that the unsuspecting public has to dubious advice.

To understand what I'm saying, just go to YouTube or Instagram and search for some simple term that a beginner might use, like 'best stocks to buy now'. To get a 'fresh' view, use an incognito/private window. Watch a few of the videos/reels that come up, no matter how strange they may look. Then, over the next few hours or days, watch whatever the algorithms of these services throw at you. You can't help but notice that there are a huge number of finfluencers out there for whom the size of the audience and other types of monetisation opportunities would be enough. There are finfluencing channels with tens of lakhs of followers and whose videos invariably notch up lakhs of views. These people can make money directly from their audiences through advertising and other methods. They don't need handouts from brokers.

To be fair, there's a lot of great learning material on the internet. In fact, this is one of the best things that has happened in recent years. There's something really great about how we're all sharing skills and knowledge online these days. I mean, just think about it - want to learn how to cook a great dish, style your hair, clean your car's air filter or grow mushrooms at home? A quick internet search, and you have people showing you how to do it for free on YouTube. It's pretty amazing how much quality stuff is out there, and for a lot of everyday tasks, it works like a charm. Need to upgrade your laptop's memory? There's almost certainly a perfect video for that.

But here's the thing-while it's great for quick, bite-sized learning, it's not always smooth sailing for more complex tasks. Sometimes, you need a bit of background knowledge to figure out if the advice is actually any good. And let's be real: in some areas, like health and personal finance, following bad advice can be really, really bad. Without a doubt, policing social media itself is too big a task for any hope of success, and in any case, there is a serious freedom of speech implication. However, cutting off the commercial link between finfluencers and SEBI-regulated entities is certainly possible.

At this point, these are just actions that the SEBI has approved. Making actual rules and policing them will be a longer story. Whether there is any actual impact on what you see on the internet is an even longer one.

Also read: Making finfluencing easier