Sebi on financial influencers: Markets watchdog Sebi has amended rules in a bid to regulate unregistered financial influencers or finfluencers amid growing concerns over the potential risk associated with such unregistered persons.
In three separate notifications, the regulator has restricted associations between its regulated entities and unregistered individuals.
This came after the Sebi board approved a proposal in this regard last month.
According to the notifications, Sebi-regulated persons and agents of such persons shall not have any association such as any transaction involving money, referral of a client, interaction of information technology systems with any other person who directly or indirectly provides advice, recommendation or makes an explicit claim for return.
“No person regulated by the Board (Sebi) or the agent of such person shall have any direct or indirect association with any other person who gives advice or any recommendation, directly or indirectly, in respect of or in relation to a security or securities, unless the person is registered or otherwise authorised by the Board to give such advice or recommendation; or makes any claim of returns or performance, expressly or impliedly, in respect of or in relation to a security or securities, unless the Board has permitted the person to make such claim,” the regulator said.
By requiring financial influencers to register with Sebi and adhere to specific guidelines, the regulator is setting a standard of accountability and expertise in the sector, market experts said.
The measure would ensure that mutual fund houses, research analysts, registered investment advisers and broker-dealers do not partner with finfluencers.
Furthermore, a small window for investor education has been provided through this partnership, subject to the condition that these finfluencers do not provide any recommendations or claim any type of profitability or performance.
This came amid growing concerns about potential risks associated with unregulated financial influencers who could offer biased or misleading advice. They typically work on a commission-based model.
Finfluencers have significantly influenced the financial decisions of their followers in recent years and therefore Sebi’s regulatory framework may hold them liable for the advice they provide.
To achieve this effect, Sebi has amended the rules governing depository participants, intermediaries and securities contracts.
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