Page 37 - Banking Finance September 2024

ARTICLE

to be demonstrated to filter out advice given by be beneficial, as finance planning and investing
Finfluencers. advisory is a time intensive activity)
Allowing other Professionals like Doctors, Lawyers
While these are favourable points, there are both grey
etc to register (again this underplays the
and black areas too, like Finfluencers provide stock tips,
specialization required for being a financial service
promote high risk products e.g. F&Os and promote
advisor)
products without taking into consideration the risk profile
of their followers or divulging the sponsorship, paid Display category of IA or RA on MITC, and many more
promotional element of their posts and pecuniary linkage
This is indeed a progressive step by the regulator to increase
with financial institutions. The uninitiated followers get
impressed by glitzy presentations, stories of success formalisation of financial advisory, that should lead to
without realising the pitfalls, downsides and market risks increased registrations of individuals and entities as IA, RA
associated with promoted investment products. This or both and SEBI hopes that the increased number of IAs
aspect of some of the finfluencers casts aspersion on the and RAs will help counter the growth in popularity of the
entire finfluencer community thereby resulting in a Finfluencers. The success of any regulation, is not in the
negative sentiment and undoing any good work that may regulation per se but in the execution, monitoring and
be attributed to them in terms of promoting financial supervision of the same. Only outcome and time will tell the
awareness, attitudes and behaviour. effectiveness of the regulation.

Post the SEBI Consultation paper, some of the finfluencers In conclusion, there are no easy solutions, the task of
have pivoted and refrained from sharing stock tips and regulator, SEBI, is challenging and sensitive, it needs to
focussed more on financial awareness and education. Still, protect investor interest, maintain trust, discipline and fair
Finfluencers currently are not seen in good light by the practices in financial markets while providing an enabling
regulators and are considered systemic risk. SEBI environment for spreading financial awareness and
received suggestions, views, opinions and representations education. In so far, the finfluencers are concerned, self-
from ecosystem participation post publishing the regulation and self-discipline will decide whether they
Consultation paper in August'2023. In August 2024 SEBI survive or perish. Their deeds alone will either help them
published another consultation paper titled "Consultation to emerge stronger or push them to deeper recesses of shady
Paper on Review of Regulatory Framework for Investment online platforms. In times to come initiatives like Virtual-
Advisers and Research Analysts" asking for public influencers, AI (algorithm driven) trading advice and more
comments with the objective of "simplifying, easing and such technology assisted financial planning interventions will
reducing the cost of compliance" for registered lead to, providers innovating with products, services,
Investment Advisors (IAs) and research analysts (RAs). consumers yearning for more and regulators being ever
This is an accommodative gesture on part of SEBI and vigilant and on their toes. The success lies in making trust,
compared to the combative stance of Consultation paper transparency, compliance and collaboration as co-travellers
in 2023, 2024 Consultation paper is aimed to encourage in this interesting growth journey.
individual and entities to register with SEBI and extend
regulatory coverage, supervision and monitoring. The
Consultation paper is fairly detailed, salient points that
First Mutual Fund Ever
are pertinent to the premise of this article are:
The first-ever mutual fund was launched in the
Defining the categories of Investment Advisors (IAs)
Netherlands in 1774. It was called "Eendragt Maakt
and Research Analyst (RAs)
Magt" (Unity Creates Strength) and was created by
Provision of registering for both categories a Dutch merchant named Adriaan van Ketwich. This
Lowering the qualifying criteria, funding and fund aimed to provide small investors with the
education qualification (from PG to UG) requirements opportunity to diversify their investments.

Allowing part time registration (though this might not

34 | 2024 | SEPTEMBER | BANKING FINANCE