Money Maestros Stuck in Regulatory Conundrum: Evaluating the Recklessness of Finfluencers

Abstract

From retail investors to small-town lads, the great COVID-19 Bull Run tempted many to make quick money through the securities market. The same duration also marked the upsurge of financial influencers or ‘finfluencers’, who propagated investment advice in the garb of financial literacy, despite not having requisite qualifications as per SEBI Regulations. These personalities often have questionable identities, and are known to mislead their followers, thereby posing a threat of trust deficit in the securities market. Recently, SEBI, in the case of ‘Telegram Channel' and ‘Baap of Charts’, held that these influencers were misleading their followers for their personal benefit. This upheaval alerted the entire financial regulatory landscape. As a vigilant regulator, SEBI has suggested the ethos of ASCI Influencer Guidelines 2023 to set out the qualifications of ‘finfluencers’ in the SEBI Investment Advisers (IAs) Regulation, 2013 and Research Analysts (RAs) Regulations, 2014. This approach was showcased in a consultation paper dated August 25, 2023, wherein the regulator suggested the registration and essential disclosures of entities and followers. Despite mentioning qualifications, SEBI lacks a regulatory framework to address the grievances caused by unregistered entities. The ‘Baap of Charts’ ruling is an example of a missed opportunity to define the acts of recklessness caused by the ‘finfluencers’, while the US securities jurisprudence discusses this aspect in light of tort of negligence. The authors, through this article, highlight the reforms and the recourse provided by SEBI and other financial regulatory bodies. The article also presents critical evaluations of the recent SEBI orders, with suggestive addendums from the US securities law jurisprudence.​