SEBI cracks down on unregistered finfluencers, but loopholes remain

"Don't miss out! You have only 5 minutes left to enroll at the current price. The course price will rise to Rs 50,000 after that, so act now!".

Have you also come across such advertisements? Are you someone who acted promptly and purchased the course?

The internet is inundated with innumerable below-average courses on the stock market and investments that target gullible investors by charging exorbitant fees.

Last month, the market regulator, Securities and Exchange Board of India (SEBI) cracked down on unregulated financial influencers who might be giving misleading investment advice. However, Sebi allowed people to educate others about investing, as long as they're not giving specific advice or promising guaranteed returns.

Storyboard18 checked the background of some of the finfluencers (someone who shares money management advice on social media platforms like YouTube, Instagram, Facebook, and others) who are not Sebi-registered but are selling "certified paid courses" on trading. Most of them have changed their intro to 'educationist', and 'digital creator ' and have disabled the comment section.

Pratyush Kumar, whose Instagram handle name is Stock Burner, has put a disclaimer in posts that read, "All information on this page is for educational purposes only. We are not Sebi registered. We only try to provide important information. We do not want to invest/trade based on our posts. You must consult your financial advisor. We will not be responsible for any of your profit/loss". Several other similar accounts have started adding disclaimers.

Kavitha Menon, a Sebi-registered investment advisor, appreciated the market regulator's decision but said protecting the retail investors is a long way off.

Menon said,"They have only made one important change and left the other one open. Education is a subjective and open-ended term leaving to being manipulated at a whim. I have always maintained that any educator must be qualified by education and experience. We don't hire teachers in our schools without basic training and qualifications, so why allow anybody and everybody to run courses on investing".

Do online courses add value?

Storyboard18 spoke to some of the retail investors who purchased courses from financial influencers such as Akshat Srivastava (2.13 million YouTube followers), CA Rachana Phadke Ranade (4.97 YouTube followers), and Sharan Hedge (3.1 million YouTube followers). The responses were subjective- both critical and laudative.

An individual, who wishes to remain anonymous, purchased a personal finance course by The 1% Club, co-founded by Sharan Hegde. The individual said, "I paid between Rs 7,000 to Rs 8,000 fee, and the course offered guest lectures of certified people. It was a good beginner course perhaps I had higher expectations".

Digital marketer Harshit Agarwal enrolled in one of the courses by YouTuber Akshat Shrivastava in June 2022. Agarwal said, "Before joining Akshat Shrivastava's course, I was randomly investing in stocks and mutual funds. I did not know how to build a portfolio. However, after I purchased Srivastava's course, I learned about investing in stocks that otherwise I would never have done on my own. I also learned about investing in different sectors, as well as, on international stocks such as Alphabet, Apple Inc, Meta, etc". Agarwal said he purchased the course for Rs 23,000 and had one year of access to it. He claimed that he booked 135% of profit in around 18 months by investing in Meta and 117% of profits in nine months by investing in HDFC MC.

Notably, Srivastava is not a Registered Investment Advisor (RIA). Last year, in a post on X, he mentioned that becoming an RIA was a "hyper complicated process and required massive compliances".

Some of the individuals have taken the ed-tech platform routes to become financial coaches. A working professional showed Storyboard18 how to become a trainer on the American learning platform Udemy. Shockingly, the platform never checks the educational records of the educators.

An official from Udemy responded to Storyboard18's query on signing into the platform as a coach. Scott Rogers, Senior Vice President, Instructor & Content Strategy at Udemy said, "Although signing up is designed to be simple and accessible because we want to encourage knowledge sharing, only the most insightful and well-prepared content stands out".

In case of inappropriate content, Rogers added, "If an instructor violates any of Udemy’s policies, their account will receive strikes and immediate action will be taken. These actions can range from mild measures, such as warning emails, to severe consequences, such as blocking or removing their course or account".

Problem for regulated educators

Raghav Gupta, co-founder at The 1% Club told Storyboard18 that they onboard experts after doing a background check, like inspection of content, taking reviews of former students, and conducting multiple rounds of interviews. Gupta acknowledged the need to regulate the online courses on trading and investment. However, the issue arises when an uncertified individual creates a substandard course on investment and absolves himself of any responsibility in case of financial loss to his student, he added.

SEBI Registered Research Analyst Sumit Shrma said, "There should be some eligibility requirement for selecting a teacher to teach a particular subject. Online platforms should disclose the qualification of the educator and potential conflict of interest".

Nevertheless, Shrma added the rising interest in the stock market and the mass followership of influencers are likely to overshadow regulated entities. He said, "The market share of finfluencers selling courses will eventually increase and regulated courses will struggle to match numbers as they are bound by compliances".

However, Menon suggests, "SEBI in conjunction with National Institute of Securities Markets (NISM) should offer a mandatory training program for anybody who wants to run a course on investing," the investment advisor added that "Institutions who are into training should only hire such qualified professionals".

Shrma added, "The best solution to prevent people from financial course-related traps is to restrict and regulate the advertising and marketing of such courses. The crackdown is required on social media and internet platforms where these sorts of courses are being provided".

(Note: We have updated the story by adding a quote from Scott Rogers, Senior Vice President, Instructor & Content Strategy at Udemy)