The Securities and Exchange Board of India (SEBI) has taken a commendable decision on Wednesday by issuing a circular to curb financial influencers, or finfluencers, especially those who illegally provide tips on stock trading. SEBI has taken steps in this direction before as well. However, the question here is not about what SEBI is doing, but about how vigilant and wise we are. Until an investor stops being self-destructive, no law or authority can prevent them from being cheated. Here’s a thought-provoking article, one that can also be applied to life.
Where there are greedy people, finfluencers will never go hungry. Look around, from Goa to Guwahati and Kashmir to Kanyakumari. Why limit it to just this map? Look anywhere in the world. There is no shortage of people eager to make quick money in the stock market. Add to that cryptocurrencies, commodities, and other investment avenues. Investors are everywhere. So are speculators. Speculators have the habit of luring people into markets, trapping them, and driving the price of stocks or commodities to unrealistic levels, only to dump them later for their own gain. They have many ways to achieve their goals, and using influencers for their benefit is one of them.
When it comes to the stock market, SEBI made another attempt on Wednesday evening to rein in finfluencers. What has SEBI done?
Only educators can now use live market data solely for educational purposes. They cannot use it to give tips like ‘buy this’ or ‘sell that.’ This applies even if the data is from the last three months or even three to thirty minutes. SEBI has also defined what constitutes educational purposes. A person engaged in educational activities must not be involved in prohibited activities. These individuals can use three months of data to share knowledge or conduct their work without directly or indirectly naming any stock (you know, using code words?). Through conversations, videos, tickers, etc., they cannot encourage investors to buy or sell specific stocks. According to SEBI’s circular…
Understand the Truth About Influencers and Finfluencers
- This address itself says that influencing is about guiding others down a specific path. These people don’t do this for free or out of goodwill. They get paid to influence others to buy something, think something, or do something. In short, these people are professionals, and ordinary people are their customers.
- Even if it sounds exaggerated, several influencers have hit the jackpot through influencing, even though they had nothing worthwhile to offer before. It’s like winning a lottery without buying a ticket. They picked up a mobile phone and camera, became influencers, and succeeded.
- Influencers get paid for their ‘work’. The ordinary person who likes, shares, and subscribes to their content ends up paying the price.
- Most influencers claim to be experts in their field, but in reality, they are often clueless. They do a little research, prepare a script, and release an attractive video. Whatever the outcome, it doesn’t affect the influencers. They move on to the next project.
Stock market educators (finfluencers often project themselves as such to serve their own interests) cannot use live stock market data, except with a three-month price lag.
Registered financial services companies cannot associate with finfluencers in any way. This point is extremely important. Many reputable companies, whose words have led naive investors to ruin, have promoted finfluencers. Several companies have exploited investors’ greed to trap them under the guise of seminars, conferences, and meetings. From now on, these companies cannot associate with finfluencers for financial or non-financial purposes. Without SEBI’s approval, educators cannot serve so-called ‘knowledge’ to the public.
What will SEBI do to those who break these rules? It can cancel their licences.
Finfluencers are a despicable bunch. Not just finfluencers, but all the self-proclaimed gurus born out of the internet and social media boom—90% of them are frauds. These people are running a business. They have opened a shop. The people who fall into their trap are simple, ordinary folks. They crave advice, guidance, suggestions, and motivation. Anything that promises free benefits is golden advice for them. Thus, these ‘knowledge spreaders’ can lead people down the wrong path. While their own fortunes rise, the money and lives of their followers go up in flames.
SEBI had already started taking steps last October to tighten the noose around registered companies. This latest move is a thoughtful step in that direction. However, only time will tell how effective it will be, not SEBI.
No tips based on live stock prices, no direct or face-to-face investment advice, no friendship or deals with finfluencers under the guise of partnership or collaboration, and if any wrongdoing is found, licences will be cancelled. SEBI’s clarity is in the right direction, but…
Where there are greedy people, finfluencers or influencers will never go hungry. I said this at the very beginning, right?
It’s not easy to stop those who fill their homes by peddling financial or other advice. We are bombarded with tips from all sides. Sadhus give tips, neighbours give tips, fellow passengers on local trains give tips… “Buy this stock,” “This medicine will cure your illness,” “Do this to make flies disappear from your home,” “Do this daily to sweeten relationships, then see…” How many of these can we avoid? We can’t, because we crave these tips. We want the shortcut to becoming rich overnight. We suffer from the disease of mistaking our half-baked knowledge for wisdom and our backwardness for prudence. We have the habit of considering others’ trivial knowledge as expertise and foresight. That’s why finfluencers and influencers are thriving like never before.
The stock market, a place already fuelled by greed and false promises, is no stranger to speculation and gambling. Speculation is not new to the stock market, and it will never become old. From Harshad Mehta (and even before him) to Ketan Parekh and beyond, there has never been a shortage of people who manipulate stock prices in their own way until 2025. Rarely does a stock’s price rise or fall solely based on fundamentals or pure trading reasons. Companies, too, have an interest in seeing their stock prices rise continuously. This is a game where several companies, along with insiders and finfluencers, collude to exploit the system. Those who succeed in this game make money, while those who don’t lose everything.
This isn’t just about people cheating others on the internet or digital platforms. Such people are also abundant on television. As soon as the stock market opens, their grand discussions on live prices begin. Newspapers and magazines are filled with articles that subtly push certain stocks. Their goal is to encourage investors to buy or sell specific stocks. SEBI may be doing its job, but no authority in any country can completely stop such fraud. Only the individual can rein it in, and that too, only if they have the personal will to stop themselves from being swayed by such tips and losing their hard-earned money. That individual is the investor themselves. How will you protect yourself from misleading, misguided tips? There’s no 100% foolproof way. However, here’s something to consider:
- In the stock market and elsewhere, invest only after long-term calculations and proper, personal research.
- Be prepared to bear losses. No one in this market, not even the greatest investor Warren Buffett, has only made profits. If even he has faced losses, who are we?
- Before trusting rumours and so-called tips, remember that your money is at stake. If you survive, it’s your luck. What else?
- Invest only as much as you can afford to lose without feeling like the ground beneath your feet has disappeared.
- When you make a profit, don’t envision endless growth. There should be a limit to how much profit you aim for before exiting an investment.
After all this, it cannot be denied that the stock market offers one of the few avenues for profitable investment. When excellent promoters, strong company fundamentals, a bright future, a positive outlook for both the local and global economy, and our understanding align, the chances of favourable outcomes increase. Otherwise, everything can go to waste. Discipline, wisdom, calculation, and timely decisions can make the stock market fruitful.
And yes, stay away from finfluencers, fraudulent stock tips from unknown sources, and the constant investment advice flashing on television. In the end, you’ll stay in profit.
