Manufacturing Reputations: A Sting Operation on the World Fin-influencers
Is a social media influencer’s opinion genuine or paid for? This question has become increasingly difficult to answer, resulting in widespread suspicion about genuine posts as well. On the one hand, there are people who blindly trust influencers and celebrities, only to be misled by fake or exaggeratedly positive posts about companies, products and services. On the other hand, the inability to distinguish has made even credible voices and opinions suspect.
 
In the past, influencers were usually movie stars, cricketers and people known for significant achievements. Later, anyone who posted engaging content on a wide range of issues and needs attracted followers, leading to tie-ups and arrangements with corporate interests. Today, the lines between genuine and promoted content are completely blurred, especially in the financial space, forcing regulators to introduce regulation. This is already long overdue. As you will see, influencers without ethical boundaries are often professionally qualified people who will promote anyone and anything for a fee.
 
The Securities and Exchange Board of India (SEBI) is working on ways to regulate financial influencers (or fin-influencers). The ministry of consumer affairs (MCA) and Advertising Standards Council of India (ASCI) have already established their own sets of rules for all categories of influencers drawing some clear boundaries and responsibilities. Is any of it working, especially in the financial space?
 
A digital marketing company was irritated enough at the lack of ethics among influencers to embark on a partial sting operation to establish that money is the only motivating factor for a majority of the fin-influencers.
 
The payments made to top influencers are substantial enough for most of them to throw ethical considerations to the wind. Being an ‘influencer’ is lucrative occupation for many people, just as being ‘independent directors’ on companies has turned into a career option for some people. Board directors, at least, need relevant corporate experience and now have to pass a test. Fin-influencers and digital marketing companies offering these services are often run by people in their 20s who have no truck with the mass of regulation, compliance requirements of regulated entities and market intermediaries. But they understand social media virality and have been quick to spot an opportunity to profit from offering their services.
 
While digital marketing companies are constantly looking out for influencers with a large following, they are often confronted with the galling situation where an influencer, having pocketed a hefty fee for a specific campaign, smoothly moves on to promote a rival, once the campaign is over. But in a business of questionable ethics, this is an obvious risk factor.
 
Another questionable tactic is to create WhatsApp groups of 100 to 800 members who work together to create positive narratives and expand the reach of an influencer campaign on, say, LinkedIn. They manufacture engagements through comments, re-posts and tweets. The sheer numbers help create virality, since the posts are pushed up by media algorithms and enhance the credibility of the post as well as the influencer. This technique is used for straight-forward product promotion, but it is also used to promote and build the credibility of fraudulent operation, shady crypto schemes, dubious gaming sites or Ponzis and multi-level marketing schemes.
 
The Sting 
The sting I am referring to was conducted by a couple of insiders who are knowledgeable about how the game works, the names of influencers, and the fees that they command. They created a fictitious digital marketing company with a fake email and no telephone number (should have been a red flag) and reached out to well-known influencers to push two cooked-up stories. 
 
Over 37 people were targeted, including professionals like chartered accountants, engineers from elite institutions like IITs and IIMs, start-up founders and angel investors who have segued into being influencers earning high fees, full-time ‘influencers’ and influencer marketing agencies.
 
The marketing agency behind the sting operation says it created two fake campaigns that were to be promoted only on LinkedIn: 1) to create positive promotions for an  initial public offering (IPO). They selected EbixCash, which was set to go public. 2) Creating a positive image about Café Coffee Day (CCD) with the spin that Malavika Hegde, the wife of founder VG Siddharth who tragically died by suicide, had taken charge of the company and was transforming it.
 
Importantly, a pump & dump operation with multiple media reports touting this very CCD myth has already played out on social media. Our sting operators insist they borrowed the idea from there. The IPO promotion was an obvious one, especially because it is a highly regulated area and a good test of ethical boundaries. 
 
Their first discovery was that none of the influencers cared about the subject matter. All quoted their fees and were quick to sign non-disclosure agreements (NDAs) based on a promise to pay, without so much as a phone call to verify if the offer was genuine, or in case of the IPO, wanting to know that name of the company that was to be promoted. To be fair, five or six of the influencers who were approached to promote the IPO backed out later because of regulatory concerns.
 
The Money
Depending on their standing, reach and experience, the amounts charged ranged from as little as Rs10,000 to as much as Rs7.47 lakh for an individual post by a start-up founder, excluding tax. Most influencers charge fees in the region of Rs 20,000 to Rs60,000. Influencer marketing agencies that run a stable of influencers had quoted as much as Rs20 lakh for a campaign, excluding taxes. Some lesser stars of the influencer space have been charging Rs4 lakh plus goods and services tax (GST). An IIM graduate, who already holds a well-paying job, was willing to sell his views for as little as Rs10,000 a post. The same with a 20+ chartered account (CA) who is already in a well-paying job. Some rank-holder CAs, looking for extra income as ‘influencers’, even agreed to promote financial courses that they have nothing to do with.
 
Many of us who were disparaging about what we called ‘two-rupee trolls’ (price per tweet) were clearly unaware of how much money was being earned by Gen-Z youngsters who questioned and discredited serious research and journalistic writing that was critical of their paymasters in corporate India. Is it any wonder that the first reactions to tweets or articles that point to wrongdoing, poor corporate governance, pathetic consumer services, etc, are usually supportive of the corporate entity and not the affected consumers? Building fake narratives is clearly a lucrative profession. Now that the sting has established that too many influencers (there will always be exceptions) don't care about the ethics or veracity of what they are promoting, a professional pedigree is apparently a big asset in ‘influencing’ the lazy and the gullible.
 
No Rules
Now, let us look at concerns of financial regulators. One of the biggest ones has been about influencers with financial deals and commission arrangements with brokerage firms or algo-writers, who tend to encourage frothy trading and lure people into pump & dump operations in specific stocks. They also create hype about IPOs. There are no disclosures since there are no rules. In May this year, SEBI banned PR Sunder, a rather brazen fin-influencer, and fined him Rs6.5 crore for violating investment advisory rules. But the more high-profile ones earning commissions get away in the absence of rules.
 
The Ministry of Consumer Affairs guidelines expects all influencers to disclose all ‘material connections’ which covers payments, incentives, free products and gifts, trips, holidays, media barters, coverage, awards, equity, discounts as well as any personal family relationship leading to such benefits. But when have you seen such disclosures in the public domain even though failure to disclose is punishable with a ban?
 
Interestingly, the rules do not go into the accuracy of endorsements and promotions. This may not be so critical in promotion of movies or consumer products and restaurants but is  key to influencing financial decisions. ASCI guidelines also require all posts by social media influencers to contain disclosures. I am told that some posts actually carry discreet hashtags which say #advt or #paidpost, but I have, honestly, not noticed any such disclosure.
 
Clearly, the line between truth and hype or even fiction is so completely blurred, that most of us are unequipped to see the difference. We don't know if a set of regulations by SEBI will lead to a dramatic difference, but it will at least draw some ethical lines and encourage a big chunk of paid-promoters to stay within the rules.
 
 
Comments
adityag
10 months ago
The bane of regulation is when regulators are clueless and keep playing whack-a-mole.

Soon enough, doctors will have to apply for a SEBI registration, when they go on YouTube and tell: "don't gamble in stock markets, not good for your heart. Make love with your spouse every night instead of looking at the depressing graph with a false breakout."

Oh, I'm pretty sure we're headed in this direction. Soon enough, PM will also have to apply for SEBI RIA registration.

anjulpthk
10 months ago
Please share more details about the digital marketing agency who conducted the sting operation and also the finfluencers involved in this.
Kamal Garg
10 months ago
Law must make such persons responsible for their acts because many people believe them to be the independent and professionals giving their opinions/advices on matters which they are supposed to know better than most of the people. And as rightly said, their must be proper disclosures by these fin-fluencers in the article/blogpost right there and that too in appropriate font size and place rather than at the fag end with extremely font size which is hard to notice and read.
northguleria
10 months ago
The way these financial website from Moneycontrol to ET etc promote these so -called Fin-influencers is also another scam wating to get exposed , I was shocked to see small-time & also infamous fin-influencers getting full page interviews and opportunities in these digital publications !
Meenal Mamdani
10 months ago
Yes, this is alarming as Indians generally do not look at the company's information but more or less go by what they are told.
From what I hear, the buyers usually follow the advice of a friend or relative, rather than an influencer. Perhaps this is because I am usually talking to people who are older who are not that social media savvy.
I have heard of older persons wanting to sell their stock when it takes a beating, rather than do some research and wait for a better price. They are loss-averse, not just risk-averse.
As usual, Indians would rather trust someone's opinion than do some digging on their own.
kananbahl
10 months ago
Hi Ma'am, please reveal their names also. It is time that some accountability is fixed.
antargat420
10 months ago
"a 20-year old chartered account (CA) ...." this person has to be a child-prodigy to become a CA by the age of 20?!
sucheta
Replied to antargat420 comment 10 months ago
Good point... it should have been a 20+ CA - correcting it appropriately. Interesting to find the most significant point in the piece was here!
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