India bans popular financial influencer from trading securities and lessons for African regulators

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How to trade indices: Index cash CFDs and futures CFDs
How to trade indices: Index cash CFDs and futures CFDs

The Securities and Exchange Board of India (SEBI) has barred popular social media influencer and finfluencer (financial influencer), Mohammad Nasiruddin Ansari, aka “Baap of Chart” from engaging in security trading, according to a report by Bloomberg.

Under the guise of offering educational training, Mohammad Nasiruddin Ansari had amassed 172 million rupees ($2.1 million) from his followers through stock recommendations. According to the report, he was accused of luring clients and investors with promises of minimum monthly returns ranging from 3,00,000 rupees to 6,00,000 rupees.

Furthermore, he offered guidance to those who paid him for ‘live market’ transactions. These actions raise concerns over the misleading nature of some finfluencers’ advice and their potential impact on followers’ investments.

The effect of Finfluencers: Mohammad Nasiruddin Ansari aka "Baap of Chart" barred by SEBI
Mohammad Nasiruddin Ansari aka Baap of Chart

The crackdown by the SEBI highlights the growing apprehensions regarding the actions of finfluencers who purport to provide their followers with profitable trading ideas. The regulator’s efforts aim to protect investors from potential financial harm caused by unregistered investment advisers and analysts.

Read Also: How Jesam Micheal allegedly scammed thousands of ‘crypto investors’ across the world with the Afriq Arbitrage System

The Influence of Finfluencers in Africa

The effect of Finfluencers: Mohammad Nasiruddin Ansari aka "Baap of Chart" barred by SEBI
Photo Credit: The Economic Times

In the age of social media, influencer culture has transcended the boundaries of lifestyle and fashion to penetrate the world of finance. It is unsure what the end result for each influencer might be but for some like Mohammad Nasiruddin Ansari, their actions are driven by personal gains.

This practice not only raises ethical concerns but also the question of whether it should be regulated especially as this could lead to market manipulation either for personal gains or causing the stock market prices to plummet for personal reasons.

Although social media platforms, like Twitter, now X, are celebrated as bastions of free speech, there is a fine line between exercising one’s right to free expression and providing stock advice for personal gain. The risks are particularly potent when the advice originates from individuals who lack expertise in the financial sector.

The recent crackdown by India’s Securities and Exchange Board of India (SEBI) on finfluencers like Mohammad Nasiruddin Ansari, exemplifies the growing global concerns about these type of influencers.

The key question that now emerges is whether it is feasible to replicate similar sanctions on finfluencers within the African context. If we recall, on March 1, 2023, the Advertising Regulatory Council of Nigeria (ARCON) announced that sanctions would be imposed on influencers, brands, and skit makers who advertise without obtaining pre-exposure approvals. 

The move by ARCON, comes in response to complaints about unethical advertising practices and misinformation on digital/online media platforms. It targets various content creators, influencers, and advertising practices.

Defaulters will face a fine of N500,000 for non-compliance. ARCON clarifies that it is not regulating social media itself but rather advertising, advertisement, and marketing communications across these digital platforms.

Steps African financial regulatory bodies should take

Photo Credit: African Export-Import Bank

However, to address these concerns, especially for influencers who carry out personal marketing strategies, regulatory bodies in Africa need to establish a comprehensive framework that defines the roles and responsibilities of influencers.

Moreover, educating the public about the risks associated with following unregistered finfluencers and promoting transparency in their recommendations are crucial steps in safeguarding investors.

To address this issue, African regulatory bodies and authorities need to take several steps:

  1. Regulatory Framework: Develop and implement a comprehensive regulatory framework that defines the roles and responsibilities of finfluencers. This framework should ensure that individuals offering financial advice and recommendations are registered and monitored.
  2. Education and Awareness: Raise awareness among the public about the potential risks associated with following unregistered finfluencers. Encourage investors to verify the credentials of individuals providing financial advice.
  3. Enforcement: Establish a robust enforcement mechanism to investigate and penalize unregistered finfluencers who engage in misleading or fraudulent activities.
  4. Transparency: Encourage finfluencers to disclose their financial interests and any potential conflicts of interest in their recommendations. Transparency is crucial in maintaining trust with their followers.

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