New Delhi (India), 7th June 2023: Finfluencers are devising novel strategies to circumvent the market regulator’s increasing scrutiny of unregistered investment advice.
Aside from renting a registration, finfluencers are creating YouTube channels where ‘buy’ and ‘sell’ calls are camouflaged in code, establishing firms as a partner of a registered analyst (RA), and more.
There is a channel, for example, that employs terms like chai (tea) and phal (fruit). The moment they feel the index is about to decline they say, “hum chai pee rahe hain” (we are drinking tea).
That is a signal for their followers to buy a put. They keep their trading charts open and the pointer at the level they estimate the index will move to signify the strike price.
When they remark, “hum phal kha rahe hain” (we are having fruit), they are indicating that the index would rise. As a result, their followers will be aware that they need purchase a call.
Another station says something like “machli mar gayi” (the fish died), and the following realise the price is set to tumble. When they say, “murgi kha rahein hain” (we are having chicken), they are expecting the price to rise.
Another strategy for evading regulatory constraints is to establish businesses in collaboration with a RA.
Any investment advice must be provided in the name of a certified analyst. As a result of this collaboration, the finfluencers are considering delivering guidance under the company’s name but phrasing it differently on their social media channels.
In February 2023, the National Stock Exchange (NSE) issued a circular stating that “any payment made by brokers to influencers/bloggers would require prior approval of the exchange and should include certain standard disclaimers.”
It further stated that finfluencers with more over 10 lakh subscribers were not eligible for marketing.
However, according to reports, SEBI merely prohibited mutual funds, registered investment advisors (RIAs), and research analysts (RAs) from engaging such influencers and providing them with advertisements. Stock brokers were allegedly exploiting the fact that they were exempt from these laws.
