Govt works to shutter ‘Ponzi apps’

  • No proposal to regulate financial influencers on social media, FM Nirmala Sitharaman said
  • In January, the government issued new rules for social media influencers, mandating clear disclosures

Gulveen Aulakh
Updated23 Apr 2023
Consumers must be cautious, said Sitharaman.
Consumers must be cautious, said Sitharaman. (Photo: HT)

New Delhi: The government is not considering any proposal to regulate financial influencers on social media, but is coordinating with the Reserve Bank of India and the ministry of electronics and information technology (Meity) to check ‘Ponzi apps’ making outlandish financial claims, finance minister Nirmala Sitharaman said.

“There are also apps which are coming out and reaching out to people saying we can do this, we can do that, your money will fetch you this much—many of who are Ponzi apps on which we are working with Meity and with the Reserve Bank, and clamping down on them like never before, so that we don’t get those Ponzi apps taking away hard-earned money,” the minister said at an interactive session with academics, students and public intellectuals at Tumakuru in Karnataka on Sunday.

“At this stage, I’m not having any proposal before me for regulating them (financial influencers). But yes, a word of caution is important,” she said, adding consumers must be cautious and do their due diligence before investing money on suggestions made by so-called ‘finfluencers’.

She said that while some of them were giving objective advice, a majority may be influenced by other factors, and therefore, counter-checking at the consumer’s end was essential. “We have to be careful. It’s our hard-earned money. You’ve earned it, you save it, you protect it,” she said.

In January, the government issued new rules for social media influencers, mandating clear disclosures about brand associations to ensure transparency and protect consumers. Influencers who fail to comply may face fines as high as 50 lakh, or be prohibited from endorsing products for up to six years. Disclosures are required to be published when there is a “material connection” between an advertiser and a celebrity or influencer.

The rules come at a time the influencer industry is projected to reach 2,800 crore by 2025, as companies increasingly rely on them to push products to their audience in a relatable and personal way.

The guidelines apply to all individuals who have “access to an audience and the power to affect audiences’ purchasing decisions.” The disclosure in an endorsement message should be clear and prominent. In case of endorsement in a picture, disclosure should be superimposed over the image for viewers to notice. In a video, it should be placed in the video and not just in the description. In the case of a livestream, disclosure should be displayed continuously in the form of a ticker during the entire length of the stream, as per government guidelines.

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