I have been sitting on a few SEBI committees for a while now. I have brought up this topic many times in the past three years. This isn’t an easy problem to solve as this revolves around freedom of speech. You can’t have a regulation that bans people from talking publicly.
Whatever I say might seem conflicted as we, along with many other brokers, have been what may seem to be a beneficiary in the short term with the customers these influencers influence. But I think it is an enormous problem even for the business because people who start trading with wrong expectations will get disappointed soon and probably never trade again. They’d probably also influence others around them not to trade in the markets. So while this might give a short-term bump, it is bad for the long term.
We can’t paint everyone with the same brush, as there are influencers who are also doing a good job at educating people on money, finance, and investing. I think the larger problem is that on social media, the louder you are, the more popular you get. So there is a perverse incentive always to keep saying something loud or say random things frequently to build an audience. So I have seen even good folks slowly morphing into something else trying to build an audience on social media. This is especially more on a platform like Twitter.
Possible solution?
You can’t stop people from showing off their lifestyles; that is a freedom of speech issue. But if anyone is making claims around profits from trading, maybe we should have a regulation that allows them to do it only if it is validated. If not, it is a case of cheating, especially if those claims are used to sell a course or make money in some other form. Launching took us a while, but that is also why we put out Verified PNL. We had to wait to see if there was no backfire for launching a feature like this. In a way, Sensibull first launched this feature with Verified MTM helped.
While nothing is illegal in selling courses, many of these influencers have extended their services to advisory and portfolio management, which isn’t allowed per regulations. SEBI should find a way to quickly act upon all these violations and have severe punishments. This is not just true related to this issue, but maybe with any financial crimes in the country. This is the only way to improve corporate governance in listed businesses and even the startup ecosystem.