The Securities Exchange Board of India (SEBI) has amended its norms in a bid to regulate unregistered financial influencers (or “finfluencers”) amid growing concerns of potential risks associated with such individuals.
In three different notifications, they have imposed restrictions on the interactions between its regulated entities and unregistered persons.
As per the notifications, it is now forbidden for individuals under SEBI regulation and their representatives to deal with any financial transactions, recommend clients, or use information technology systems in any way with anybody who, whether directly or indirectly, offers advice, recommendations, or makes explicit claims regarding returns.
Moreover, no individual under SEBI regulation, nor any of their representatives, may be directly or indirectly associated with any person who offers advice or recommendations concerning a security or securities.
“Unless the person is registered with or otherwise permitted by the Board to provide such advice or recommendations, or makes any claim of returns or performance, explicitly or implicitly, related to a security or securities, unless the person has been permitted by the Board to make such a claim,” the regulator declared.
The regulator is setting a standard for accountability and competence in the sector by making finfluencers register with it and adhere to specific guidelines. This move would ensure that stockbrokers, mutual fund firms, research analysts, and registered investment counsellors are guaranteed not to collaborate with finfluencers.
A tiny exception has been made, nevertheless, for these partnerships’ investor education programs. However, this is subject to the requirement that influencers refrain from offering advice or speculating about results or capabilities.
This decision came after the approval of a proposal by SEBI’s board last month. The new rules are a response to growing concerns about the dangers of unrestricted finfluencers, who greatly influence people’s financial decisions and may provide deceptive or biased advice.
