After Finance Minister Nirmala Sitharaman’s recent statement on finfluencers and ponzi apps, investors have become skeptical of the advice from finance influencers. However, not all finance influencers are certified financial advisors. Individuals who look to fix their finances often follow influencers to learn about the latest trends and investment opportunities.
The recent statement by Finance Minister Sitharaman indicates growing concern around the impact of finfluencers on the financial decisions of the general public.
“Social influencers and financial influencers are all out there but a strong sense of caution is required in each one of us to make sure we do double-checking, counter-checking,” Nirmala Sitharaman said at a Thinkers Forum event in Bengaluru last week.
Pump-and-dump schemes
Pump-and-dump schemes are rampant on social media platforms like Youtube, Facebook, Telegram, and Whatsapp, wherein the perpetrators entice investors into buying a company stock to inflate the price artificially and then sell their shares when the prices rise.
There are a few finfluencers who knowingly promote false or misleading information to make illegal gains, as we saw in the YouTube pump and dump scheme that SEBI recently cracked down in March.
“There is no debate that certain influencers act with ulterior motives when soliciting advice on social media. I personally feel stricter restrictions must be put in place to safeguard the end consumer. That being said – when taking investment advice online, consumers must ensure that the person is SEBI registered. And even then doing your own research is key,” said Ayush Shukla, Founder of Finnet Media.
It is disheartening to see that a few finfluencers have exploited their influence to engage in illegal activities, such as the pump and dump scheme exposed by SEBI. “These individuals not only erode trust in the financial community but also put the financial well-being of their followers at risk,” said Kunwar Raj, Founder of Unfinance and Finance Content Creator.
It’s essential for regulatory bodies like SEBI to remain vigilant and take necessary actions against those involved in fraudulent activities, added Kunwar Raj.
On government regulating influencers
The government is not considering any proposal to regulate financial influencers on social media, but is coordinating with the Reserve Bank of India and the Ministry of Electronics and information technology (Meity) to check ‘Ponzi apps’ making outlandish financial claims, finance minister Nirmala Sitharaman said.
“Nirmala Sitharaman ji said that not right now, but they might regulate them in the future and as they should. Only thing is that they should definitely speak to folks like us, folks like the creator itself, speak to the stakeholders, understand the risk involved, and understand the problem from the government’s end because the government is also saving the interest of the retail investors which is fair. But I think the regulation should be a mutual consensus and not a one-sided street,” said Finance Content Creator – Shreyaa Kapoor.
As per Kunwar Raj, it’s important to balance such regulations with the need to preserve freedom of speech and the ability of individuals to share their financial opinions and experiences.
How consumers can safeguard themselves
1) Content on social media should be consumed with the mindset of merely obtaining information and not financial advice. Most content pieces are made with the sole purpose of simplifying the plethora of information available.
2) It is imperative to understand your individual position while assessing a content piece. Personal finance is “personal” and hence one piece of information might not hold true for everyone.
3) As a consumer it is also our duty to do our own research.
4) We should not take stock market tips from anyone. If we must do it, ensure the person is SEBI registered.
In the age of viral tweets and trending Reels, a well-regulated finfluencer environment could be the lifebuoy that keeps investors afloat.