Does SEBI's regulatory proposal ring a death knell for finfluencers?

Unsolicited financial advice flooding social media platforms has prompted India's market regulator, the Securities and Exchange Board of India (SEBI), to release a consultation paper aimed at transforming financial influencers, commonly known as 'finfluencers,' from mere 'influencers' to 'informers.' Industry leaders share their perspectives on the potential impact of this paradigm shift.

Encountering unsolicited financial advice is a common experience for social media users. It exposes users to varying degrees of influence, with some dismissing such encounters while others fall prey to the insights shared by financial influencers. This susceptibility can lead individuals down paths of misguided investments or financial decisions, posing risks to their overall financial well-being.

In response to this rising trend, SEBI has issued a consultation paper addressing the growing impact of unregistered 'finfluencers' who dispense financial advice and content to social media users.

Recognising the absence of requisite qualifications and regulatory oversight among numerous finfluencers, the paper titled 'Consultation Paper on Association of SEBI Registered Intermediaries/Regulated Entities with Unregistered Entities (including Finfluencers),' underscores the potential for these influencers to disseminate misinformation and create conflicts of interest.

The paper aims to disrupt the revenue models of these influencers by preventing registered entities from associating with them. SEBI proposes strict regulations, barring registered intermediaries from any form of association with unregistered finfluencers. SEBI was open to accepting public suggestions on the paper until September 15. The roll out of the final regulations is awaited.

Notably, these registered entities include financial businesses like depository participants (organisations that facilitate holding securities in electronic form and enable securities transactions), mutual funds, portfolio managers (individuals or entities managing portfolios of securities or funds on behalf of clients), investment advisors, and venture capital funds. 

Although influencer marketing for the BFSI sector mostly ensures a decent size of viewership, the scrutiny implemented by SEBI might have some impact on the way these companies work with influencers. In a bid to decode this impact, afaqs! spoke to Sujay Rachh, CMO, Nuvama group. 

Brands rethinking influencer collaborations?

Rachh shares that anticipating a SEBI crackdown on finfluencers, the company preemptively paused its influencer marketing initiatives. He also asserts that SEBI is striving for complete transparency and a thorough comprehension of financial businesses on social media through this initiative, expressing appreciation for the consultation paper.

“The new guidelines can turn the brand communications more credible. With this, the regulator can ensure that intermediaries like us are able to associate with influencers in a more structured manner. Hence, this can eradicate unnecessary bad practices that are prevalent in the market.”

Regarding Nuvama’s association with influencers post the SEBI paper, Rachh says, “We have partnered with a lot of influencers in the past. But, given the number of cases against influencers rising and the new SEBI consultation paper, we have slowed down our association with influencers for the time being."

"This is because we want to ensure that as a brand we are in line with the intent of the regulator. Thus, we currently don't have any influencer programs running. We want to take a step back and understand what the new guidelines could imply for us. We will take a final call subsequently.”

Fintech companies to navigate an altered influencer marketing landscape

It is also crucial to recognise that for companies operating in the digital age, allocating resources to digital marketing is an integral component of their overall marketing budget.

However, for fintech companies native to the digital realm, digital marketing takes on a significantly more prominent role within their strategic marketing initiatives.

Sonali Jindal, COO and co-founder, RING, a digital payments app of fintech platform Kissht, notes that the increased scrutiny can have a huge impact on the way the platform drives its marketing.

With the paper, she feels ‘influencing’ will now shifted to ‘informing'. Elaborating, she says influencer partnerships will no longer be limited to just endorsements.

“We recognise that in this new landscape, authenticity reigns supreme. We understand that influencers can be our allies in simplifying the complex realm of financial services, and helping individuals make informed decisions."

"While this regulatory shift brings challenges, it also offers room for innovation. At RING, we see this as an opportunity to collaborate with influencers who share our commitment to responsible finance, ensuring that the information disseminated aligns with our ethos of transparency and consumer empowerment,” she says. 

What's in store for the influencer community?

Even though the industry and consumers welcome SEBI’s directives, lines can get a little blurred when it comes to distinguishing right from wrong when it comes to understanding the merit of the takes of a particular influencer. Will this move pit all of them in the same boat? 

Financial influencer and co-founder, Fintroop, Shreya Jaiswal, believes that this will lead brands to assert more caution while partnering. Further, she also notes that SEBI has a reputation for ensuring strict compliance.

Speaking about the impact of this on the finfluencer community, she says, “SEBI’s objective here is not to curb the finfluencer community in general; rather it is to restrict those influencers who make money on the cost of their followers by selling unwarranted stock tips and making false claims."

"Although in the short run, we may see a little slow down or change in the finfluencer marketing ecosystem, in the long run this cleansing process will only make the finfluencer community more reliable for the audience and thus more attractive to the brands.”

She further adds that while an unregistered finance influencer promoting a financial product could be a harm to the society, a comedy creator talking about the same financial product could be seen as a normal branding activity.

Moving forward, the business interaction with other genres of influencers could also see some regulations.

Rubeena Singh, country manager - India & MENA, AnyMind Group, (which operates influencer marketing platform AnyTag) offers a distinct perspective.

She feels that the digital landscape is saturated with influencers lacking genuine expertise, capitalising on the audience's vulnerability for quick financial gain.

With the imminent rollout of new guidelines, Singh suggests that genuine influencers, regardless of their niche, stand to benefit, as adherence to regulatory norms could differentiate them from unscrupulous counterparts.

“This mandate, while specifically targeting finfluencers, sets a precedent for a more accountable influencer marketing paradigm across industries. Genuine influencers, regardless of their niche, will likely view this as an opportunity. By adhering to regulatory norms, they can distinguish themselves from the sea of unscrupulous influencers, elevating their credibility and appeal to both brands and audiences," she elaborates. 

She believes the move by SEBI will undoubtedly compel fintech brands to exercise heightened caution in their influencer collaborations, ensuring that their associations align with genuine, informed, and registered advisors. By doing so, they not only safeguard their brand reputation but also protect unsuspecting audiences from misleading information.

(Images used in the article use generative AI)