Clipped from: https://www.thehindubusinessline.com/opinion/editorial/asci-norms-alone-cant-check-influencers-excesses/article67224359.ece
The Advertising Standards Council of India’s guidelines for influencers are helpful, but these are unlikely to check malpractices of influencers who want to defraud investors or consumers
The rapid growth in digital media content and consumption has created fresh challenges to regulators in supervising digital advertising. The problem becomes more complicated with advertisers using influencers, who have followers that act on the free advice doled out through social media and other internet platforms. With the advertising often being disguised as content, consumers are mostly in the dark about the actual intent of the influencer.
Given the growing clout of these influencers, the sluggishness shown by financial market regulators in framing rules for these entities is a trifle surprising. The Advertising Standards Council of India’s (ASCI’s) guidelines for influencers are helpful, and so are the recent changes to its rules governing influencers in the BFSI and health and nutrition sectors. But these are unlikely to check malpractices of influencers who want to defraud investors or consumers. SEBI and the RBI, along with the Finance Ministry, must speedily issue watertight regulations for finfluencers.
The ASCI has now said that influencers providing advice or promoting products or services in the banking and financial services or health and nutrition sector should be registered with the relevant regulatory authority and suitably qualified; this registration or qualification must be prominently displayed along with the content. This is a good move since displaying the antecedents of the influencer prominently will help the viewer decide on the soundness of the advice. This may be especially helpful while buying health products based on the advice received from the internet. ASCI’s guidelines also lay down that all advertisements published by social media influencers or their representatives must carry a disclosure label that identifies it as an advertisement. These disclosure rules, however, may not be effective in checking financial influencers because a ‘material connection’ has to be evident between the advertiser and the influencer to enforce them. Such a material connection may not exist in finfluencers in stocks or derivatives, where they may not be taking compensation from the company issuing the product. But there could be other malpractices such as front-running or stock price manipulation, or peddling of dubious stocks by market operators. These cannot be labelled as advertisement and hence will not fall within the purview of ASCI’s rules.
SEBI should stipulate that all influencers giving advice on stock and derivatives of currency, commodities and stocks should register with it as financial advisor or research analyst and be governed by the rules laid down for these entities. Similarly, IRDAI and the RBI should also frame guidelines for influencers talking about insurance and fixed income products. The challenge may arise in regulating influencers who peddle unregulated financial products such as private cryptocurrencies, overseas foreign exchange trading, structured fixed income products, etc. The Finance Ministry needs to step in to fill the regulatory gaps.
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