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Clearing the air on finfluencers, Ananth Narayan Gopalakrishnan, Whole Time Member, SEBI has clarified that finfluencers who receive any consideration for investment advice fall under SEBI investment adviser regulations.
Addressing the content creators at the recently held Moneycontrol Creator Economy Summit 2023, Ananth said, “If you provide investment advice for consideration, you are an investment advisor and you are required to register yourself and follow the regulations and code of conduct that go along with it.”
Currently, finfluencers have multiple source of income as they receive consideration from platforms like Youtube or Instagram depending on views, advertisement revenue through paid promotions and selling of online courses. However, if an individual educates people free of cost to spread knowledge on social media platforms, he is exempted from the SEBI investment advisory regulations.
Ananth further explained that any advice which includes security markets products like stock buy/sell, trade is an investment advice. However, this does not include advice given on television or public media. Likewise, an article written also does not constitute advice. But any advice given for consideration even on social media falls under the ambit of investment advice, he clarified.
Further, Ananth has urged content creators to reach out to the market regulator through an association to seek relaxation on regulations if any. “We need educators and good content creators because this gospel of the securities market has to be passed on to a whole bunch of people who are not there as yet,” added Ananth.
The need for good quality financial education
The shift from fixed deposit-based saving into security-based market saving facilitates capital formation and is currently ongoing.
While there are 4 crore mutual fund subscribers, the number of PANs linked to Aadhar is significantly more at 51 crore. Also, though Rs 27.5 lakh crore represent individual MF assets, there is Rs 33 lakh crore currency in circulation and Rs 196 lakh crore in savings accounts.
The opportunities are huge and there is a need for good quality financial education so that more and more individuals can come into the security market ecosystem.
The components of quality financial education
Research papers and statistics show there is a strong correlation between over-trading and low return and the variation across different portfolios of securities is largely due to asset allocation i.e. choice of securities. However, there is not enough finfluencer material that emphasises these fairly universal truths in most research communities.
The broad point is that there should be education backed by research and actual data, keeping investor interests in mind. Individuals coming to the securities market need to be well informed as the best form of investor protection is to inform investors.
For those creating financial content, it is advisable to read investment advisers regulations and prevention of unfair practices regulations. The advice should be as if it is advising a family member on how to create wealth over a time frame of 20-30 years backed by research and in an engaging, simple and understandable manner.
The importance of quality financial education
Compromised quality may break down the trust of the ecosystem and threaten capital formation. Individuals entering in as well-informed are likely to stay for long which in turn will foster the growth of the ecosystem and continuity of capital formation.
