The upcoming struggle for Finfluencers

“With great power comes great responsibility”, is my favourite dialogue from “Spider-man”.

Are you a financial market expert with more than 10 lakh followers?

Well, you too have great responsibility on your shoulders. And the regulator is all set to ensure that the realisation is not lost on you.

On June 29, 2023, various digital media companies reported that SEBI (our very own securities market regulator) is finalising a discussion paper on rules regulating financial influencers aka “finfluencers” and the paper will be out in a couple of months.

While we are yet to hear from SEBI, the Advertising Standards Council of India (ASCI) has come out ahead in the race to protect consumers with a direct impact on you as a finfluencer.  

On August 17, 2023, ASCI issued revised guidelines for influencer advertising in digital media to include rules for health and financial influencers.

The ASCI is an independent, voluntary self-regulatory organisation that aims to ensure advertisements in India are fair, honest and are compliant with the ASCI Code.

It is a known fact that consumers are not able to distinguish between content and advertising. These guidelines are to protect the consumers against misleading advertisements as well as exploitation of their trust.

Let us see what the guidelines have in store for a finfluencer.

#1 – Who is an influencer?

An Influencer is someone who has access to an audience and the power to affect their audiences’ purchasing decisions or opinions about a product, service, brand or experience, because of the influencer’s authority, knowledge, position, or relationship with their audience.

These finfluencers have a material connection with the advertiser. Material connection includes getting any monetary compensation or gifts from the advertisers. Material connection is not limited to monetary compensation. It also includes mentioning or talking about the advertiser’s product or service.

#2 – Who are financial influencers?

Influencers providing advice and/or promoting and/or commenting on merits or demerits on aspects related to products and services in the fields of Banking, Financial Services and Insurance (BFSI) will be considered as or categorised as financial influencers.

In case of financial influencers, material connection also includes giving a referral link on the website of the influencer. The finfluencers get commissions through these referral links.

#3 – So, what do these finfluencers need to do?

Get registered with SEBI or IRDA.

No joke!

ASCI guidelines have clearly mentioned that influencers providing advice on stocks and investments have to get registered with SEBI. They should have the necessary qualifications and certifications in order to provide such information and advice to the consumers.

For financial advice other than stocks, the influencers must have suitable qualifications such as an IRDAI insurance license or should be a Chartered Accountant (CA) or a Company Secretary (CS).

ASCI may ask for proof of qualifications and certifications.

#4 – What are the compliance requirements?

The guidelines mention disclosure requirements.

The finfluencers have to provide their SEBI registration number along with their name and qualification.

The influencer must disclose such qualifications and registration/ certification details prominently, as follows:

1. Superimposed on the visuals prominently and upfront, or mentioned as the opening remark in videos.

2. For blogs or any text-based posts, they should be stated upfront before the consumer has to read the post.

3. In the case of podcasts or a pure audio medium, they should be called out at the beginning of the advertising content.

The finfluencers also have to follow all the disclosure requirements as mandated by the respective regulators from time to time.

Though ASCI is not the regulatory body for the financial influencers, it can help SEBI and IRDA to crack down on the finfluencers.

What is not clear?

• The ASCI guidelines fail to mention under which regulation should the influencer get registered with SEBI.

I guess that will be determined by the nature of work being carried out.

I am assuming that since the guidelines talk about advice on stocks and investment, the finfluencers need to get registered as an Investment Adviser (RIA).

• The guidelines also don’t mention how will the financial influencer be determined. Will it be on the basis of material connection or following on social media or both?

Now that reminds me – Did you observe I mentioned “10 lakh followers” at the start of this post?

Here is the reason – If the finfluencers have to get registered as RIA, they also have to follow the advertisement code issued by BASL.

BASL code states that a celebrity is the one who is an Influencer with more than 10 Lakh followers / subscribers (per social media handle) on any social media platform that includes but not limited to YouTube, Instagram, Facebook, Twitter, etc.

This is the clue about the “fans” or followers-based categorisation of an influencer.

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The next big update, if at all, has to come from SEBI. There is an eerie silence there.

Till then, influencers who are ready to accept the new environment are welcome to talk to us and understand how they can start complying.