In an era characterized by technological interconnectedness, the proliferation of online scams has been alarming, especially in the aftermath of the global pandemic. An emerging cause for concern has been the ‘pump and dump’ schemes, where the value of certain shares is artificially inflated through the spread of misleading information. This paves the way for certain entities to profit at the expense of unsuspecting investors.
The Securities and Exchange Board of India (SEBI), the nation’s regulatory body, has identified these practices as fraudulent.
The spotlight was cast on these schemes recently when allegations surfaced involving renowned actor Arshad Warsi, his wife Maria Goretti, and other accomplices. They were accused of using deceptive YouTube videos to artificially boost the share prices of Sadhna Broadcast and Sharpline Broadcast.
The content claimed a shift in the company’s operations from TV production to film creation and an alleged contract with a major American company, valued at a whopping 1,100 crore INR, to produce devotional movies.
In the aftermath of these allegations, Warsi defended himself and his spouse, expressing their limited understanding of stock investments. He mentioned their investment in Sadhna, which resulted in a substantial financial loss, similar to many others. The emergence of such high-profile cases led SEBI to turn its focus towards the activities of ‘finfluencers’ or financial influencers, who have risen to prominence over the past two years.
SEBI’s Guidelines and the Era of Finfluencers
SEBI recently introduced guidelines aimed at regulating financial influencers active on social media platforms. The objective is to safeguard investors against misleading or biased information concerning financial products or services.
Data from the Advertising Standard Council of India (ASCI) revealed a surge in complaints about undisclosed financial affiliations between influencers and brands since 2021. Interestingly, personal care and virtual digital assets were the dominant sectors of complaint in the fiscal year 2022, with Instagram leading the platforms.
The guidelines introduced by SEBI emphasize several key areas:
- Disclosure: Ensuring influencers reveal brand affiliations, partnerships, sponsorships, or other paid associations for all relevant posts across platforms. However, stock recommendations currently remain outside its scope.
- Fairness and Accuracy: Financial influencers and platforms must provide valid and unbiased information about securities they promote, abstaining from any form of misleading representation.
- Advertising Standards: Adherence to ethical and legal advertising norms is paramount, and any form of deceptive advertising practice is strictly prohibited.
- Regulatory Compliance: Financial influencers must adhere to all securities laws, guidelines, and have measures in place to prevent any illegal or fraudulent activities.
Given this backdrop, it’s crucial for individual investors to exercise caution and conduct thorough research. Blindly following the directives of influencers or unverified sources can lead to severe financial setbacks.
Investors should focus on understanding the intricacies of their investments, referring to reputable research reports and financial outlets, and building a long-term investment strategy that aligns with their financial aspirations and risk appetite.
Adopting a discerning approach and maintaining a healthy skepticism towards “too good to be true” offers can be the best defense against falling prey to these fraudulent schemes.