In the ever-evolving landscape of financial advisory, Sharan Hegde’s burgeoning empire stands at the intersection of innovation and regulation, challenging the boundaries set by the Securities and Exchange Board of India (SEBI). The journey of Hegde, who ascended from a management consultant at PwC to a financial influencer with a staggering six million followers, epitomizes the meteoric rise of ‘finfluencers’. By July 2024, his financial advisory business has amassed an annual revenue of ₹60 crore, predominantly driven by his ‘One Percent Club’. However, this ascent raises pivotal questions about the regulatory implications for social media influencers venturing into registered investment advisory (RIA) territories.
The core of this debate lies in the appropriateness of social media influencers dispensing financial advice through RIA entities they own. The Securities and Exchange Board of India’s (SEBI) advertising code for RIAs now faces unprecedented scrutiny. Traditionally, finfluencers like Hegde were bankrolled by brokers and financial firms, often without transparent disclosures to the public. Hegde himself was previously admonished by the Advertising Standards Council of India (ASCI) for an undisclosed promotional post about Cred (Dreamplug Technologies).
The crux of SEBI’s regulatory challenge is the unregistered status of many finfluencers. While offering financial advice for a fee without SEBI registration is prohibited, free advice dispensed through social media remains a grey area. This ambiguity persisted until SEBI took decisive action in August 2023, aiming to delineate financial influencers from the regulated financial system.
In a significant development, Hegde’s business received ₹10 crore in funding from Nikhil Kamath, co-founder of Zerodha, in October 2023. Subsequently, Hegde registered One Centurion Ventures Pvt. Ltd, which acquired an RIA license under the brand name ‘Personal CFO’. This entity, along with ‘Finance with Sharan’ and ‘One Percent Club’, forms a connected ecosystem under Hegde’s stewardship.
Yet, SEBI’s new directives in June 2024, barring regulated advisory firms from collaborating with unregistered influencers, present a formidable challenge. Hegde, lacking the requisite experience and qualifications to be an RIA himself, relies on the credentials of Diksha Shukla, a former portfolio analyst at INDmoney. Despite this, Hegde harbors grand ambitions for Personal CFO and One Percent Club, envisioning a demand for thousands of finance experts.
Hegde’s plans, however, are fraught with regulatory pitfalls. The website “thepersonalcfo.in” lacks crucial information mandated by SEBI, such as the RIA license holder’s details, complaint mechanisms, and the Investor Charter. Harsh Roongta, a SEBI-registered advisor, highlights these omissions, questioning the transparency and compliance of Hegde’s operations.
Suresh Sadagopan, principal officer at Ladder7 Wealth Planners, elucidates the precarious nature of SEBI’s advertising code for finfluencers. The code requires meticulous compliance to avoid any content being construed as unauthorized investment advice. This stipulation underscores the inherent contradiction in Hegde’s model, where his personal social media following indirectly fuels his RIA business.
Hegde’s reliance on his personal brand, despite his non-registration with SEBI, creates a murky regulatory landscape. His substantial following serves as a funnel for his RIA, Personal CFO, necessitating strict adherence to SEBI’s advertising code. Every social media post could potentially be classified as an advertisement, necessitating prior SEBI approval.
This regulatory conundrum was exemplified by a recent social media post from Hegde seeking to hire finance experts. The post, devoid of mandatory SEBI details, sparked controversy over its classification as an advertisement. Naveen Fernandes, Public Interest Director at BASL, underscores the imperative for compliance, citing potential investor misdirection and legal contraventions.
Ultimately, Hegde’s business model poses critical questions for SEBI. Can a finfluencer, bypassing stringent advertising codes, effectively act as a lead generator for an RIA? SEBI’s June 2024 decision reaffirms its stance on separating regulated firms from unregistered influencers. However, in Hegde’s case, the symbiotic relationship between his personal brand and RIA entity presents a unique regulatory challenge.
The resolution of this issue hinges on SEBI’s regulatory rigor. Will it enforce its advertising code unequivocally, or will the lines between finfluencers and RIAs continue to blur? For Sharan Hegde, the choice is equally profound: to delineate his roles as an educator, influencer, or RIA. The future of financial advisory in India rests on these pivotal decisions.
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