The Securities and Exchange Board of India (SEBI) has proposed a set of guidelines for financial influencers (finfluencers) in order to protect investors from potential risks. The guidelines are still in draft form, but they are expected to be finalized and implemented in the near future.
The proposed guidelines include the following requirements for finfluencers:
- Registration: Finfluencers will be required to register with SEBI. This will involve providing information about their qualifications, experience, and any conflicts of interest they may have.
- Disclosures: Finfluencers will be required to make certain disclosures in all of their financial content. These disclosures will include their registration number, any conflicts of interest they may have, and the risks associated with the financial products or services they are promoting.
- Recommendations: Finfluencers will be prohibited from making personalized financial recommendations to their followers.
- Association with regulated entities: Finfluencers will be prohibited from having any association with registered intermediaries or regulated entities. This means that they will not be able to receive any payments or other benefits from these entities in exchange for promoting their products or services.
The proposed guidelines are expected to have a significant impact on finfluencers. Many finfluencers currently rely on payments from registered intermediaries or regulated entities for their income. The ban on these payments is likely to force many finfluencers to change their business model.
In addition, the requirement for finfluencers to register with SEBI and make certain disclosures is likely to increase their costs and regulatory burden. However, the guidelines are also expected to help to protect investors from potential risks.
How Will It Affect Finfluencers?
Here are some of the specific ways in which the proposed guidelines will affect finfluencers:
- Finfluencers will no longer be able to receive referral fees from stockbrokers or other financial intermediaries. This is likely to be a significant blow to the income of many finfluencers.
- Finfluencers will no longer be able to promote the products or services of regulated entities in exchange for payments or other benefits. This will also make it more difficult for finfluencers to generate income.
- Finfluencers will have to make more disclosures in their financial content. This will increase their workload and make it more difficult for them to produce content.
- Finfluencers will have to register with SEBI. This will involve providing information about their qualifications, experience, and any conflicts of interest they may have. This will increase the regulatory burden on finfluencers.
Who Should Investors Follow?
Are we suggesting that nobody should follow Finfluencers.
No. Young investors should carefully access and judge when making investment, instead of blindly trusting infuencers.
Here are some tips for young Indian investors on how to follow and learn from experienced investors:
- Identify experienced investors who share your investment philosophy and risk tolerance.
- Evaluate the track record of experienced investors before following their advice.
- Be critical of the advice you receive from experienced investors. Do your own research and make your own investment decisions.
- Be aware of the potential for conflicts of interest. Some experienced investors may be promoting investment products or services in exchange for compensation.
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