SEBI cracks down further on finfluencers; bans registered entities’ ties with unregistered entities

MUMBAI: The markets regulator Sebi has taken a decisive stance against finfluencers or social media influencers who promote stocks and offer incomplete investment advice to unsuspecting investors, by prohibiting registered entities from associating with unregistered individuals or entities.

Last August, Sebi issued a consultation paper on the matter and sought public feedback, with the regulations now implemented based on those inputs.

Addressing the media after the board meeting, Sebi chairperson Madhabi Puri Buch said here Thursday “the Board has created a safe space to differentiate a regulated advisor from unregistered one because we cannot exercise any control on entities/persons not regulated by us.

“We do not have any jurisdiction over people we do not regulate. We only have jurisdiction over people who we regulate. Also, an investor knows she is dealing with registered entity and the payment channel he is paying is a safe channel to pay through,” the chairperson said.

“Persons regulated by the Sebi and the agents of such persons shall not have any association, like any transaction involving money or money’s worth, referral of a client, interaction of information technology systems or any other association of similar nature or character, directly or indirectly, with any other person who, directly or indirectly, provides advice or recommendation or makes any implicit or explicit claim of return or performance, in respect of or related to security or securities unless permitted by the Board to provide such advice/recommendation,” Sebi said in a statement.

Sebi has also mandated that registered entities ensure their associates do not engage in prohibited activities.

Financial influencers, known as finfluencers, provide advice on various financial topics such as securities investment, personal finance, banking products, insurance, and real estate through social or digital media platforms. They wield significant influence over their followers’ financial decisions.

In recent years, such people have drawn flak for misguiding and exploiting gullible investors. Some have even resorted to outright unethical or even illegal practices and methods. And what’s more many such people are contracted by brokers and mutual funds to bring in more customers.

The Sebi said finfluencers who’re registered with Sebi, stock exchanges or the Association of Mutual Funds in India “shall display their appropriate registration number, contact details, investor grievance redressal helpline, and make appropriate disclosure and disclaimer on any posts”.