- Only 6.3% of 48 analyzed finfluencers are registered with SEBI in India
- Over 33% of finfluencers provide stock market recommendations without registration
- Many finfluencers violate SEBI rules by giving buy, sell, or hold calls illegally
India's finfluencer game is getting stronger with each passing day, but there are some red flags in how the market is expanding. Out of 48 finfluencers analysed by CFA Institue, only 6.3% are registered with the Securities and Exchange Board of India.
What this means is that only a small proportion of these financial influencers are qualified to give stock market recommendations; however, over 33% of them provide recommendations.
A person or entity generally needs to be registered with SEBI if they are in the business of providing buy, sell or hold recommendations, price targets, trading calls (including intraday calls) among other financial advice.
Therefore, a considerable section of finfluencers giving out buy, sell, or hold calls on stocks are actually not eligible to do so and are in violation of SEBI's regulations.
The report also flags disclosure standards as an area of concern. More than a third (37.5%) of finfluencers reviewed did not disclose potential conflicts of interest, while over a quarter omitted important information such as fees, tax implications or lock-in periods.
SEBI mandates that registered research analysts making public stock recommendations must provide clear and prominent disclosures to help investors assess any potential conflicts of interest.
These include the analyst's name and SEBI registration details, whether the analyst or their associates have any financial interest or beneficial ownership in the recommended security, any material conflicts of interest, and whether they or their employer have received compensation from the subject company.
Who Is A Finfluencer?
The market regulator in its 2024 memorandum defines a financial influencer as someone who provides "information and/or advice/recommendations on various financial topics" including investing in securities, personal finance, banking products, insurance, etc. through their content on various social or digital like Instagram, Facebook, YouTube among others. These persons should also have the ability to influence the financial decisions of their followers.
Does SEBI Regulate All Finfluencers?
Notably, not every finfluencer falls under the ambit of SEBI's regulations. When social media content crosses from general financial awareness and education into investment advice, recommendations, or claims about returns or performance in relation to securities, it enters territory that SEBI regulates through its existing framework for investment advisers and research analysts.
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