Unqualified financial influencers to be reigned in by SEBI with new guidelines in the works

Earlier this year the Enforcement Directorate froze crypto exchange Vauld’s assets worth Rs 370 crore after it blocked withdrawal and deposits for clients. Although this wasn’t the first exchange to crash, social media influencers had been promoting its 12 per cent interest on virtual assets, as crypto fixed deposits. The oversimplification cost investors their money, and now the Securities and Exchanges Board of India (SEBI) is creating a framework to govern financial influencers or finfluencers, as they are known.

Vauld is just a tip of the iceberg

The Vauld debacle was just an Indian rendition of the Save the Kids scam, which involved UK-based influencers tricking people into investing in a dubious charity crypto wallet. Although all finfluencers aren’t scammers, SEBI is concerned that people giving investment advice without being qualified to do so, are putting young investors at risk. The influencer of these social media financial advisors has also had adverse effects on recent startup IPO, and has caught the regulator’s attention.

Not just another social media fiasco

Twitter’s new boss Elon Musk is also known for affecting stock prices and swaying the value of meme coins with a single tweet. Financial influencers might be attractive to young investors, but with savings at stake, the repercussions are far worse than a usual social media fiasco. Influencers are also being paid to jack up their stock prices by giving biased advise to vulnerable investors online.

Violations force SEBI’s hand

Mostly finance influencers are able to gain followers thanks to their ability to simplify complex financial jargon, which encourages millennials and gen z to invest their savings. SEBI stepped in, after more than 400 cases of influencers violating norms related to finance and crypto in India. While influencers are complying with new norms that mandate them to be transparent about paid promotions, some are still flying under the radar.

SEBI has taken action against crypto advertisement by celebs, but can’t crack down against influencers without a financial contract. The regulator also faces a challenge to define who exactly can be called a financial influencer.