SEBI Amends Norms To Regulate 'Finfluencers'
This came after the SEBI's board approved a proposal with regards to the issue last month.
The Securities and Exchange Board of India has amended norms in an attempt to regulate unregistered financial influencers or 'finfluencers', due to growing concerns about the potential risk associated with such unregistered persons giving financial advice.
In three separate notifications, the regulator has restricted associations between its regulated entities and unregistered individuals.
This came after SEBI's board approved a proposal with regards to the issue last month.
As per the notifications, the people regulated by SEBI and the agents of these people are not to have any association or any transaction involving money, referral of a client or interaction of information technology systems with any other person who, directly or indirectly, provides advice, recommendations or makes explicit claim of return.
"No person regulated by the Board (SEBI) or the agent of such a person shall have any direct or indirect association with another person who provides advice or any recommendation, directly or indirectly, in respect of or related to a security or securities, unless the person is registered with or otherwise permitted by the Board to provide such advice or recommendation; or makes any claim, of returns or performance expressly or impliedly, in respect of or related to a security or securities, unless the person has been permitted by the Board to make such a claim," the regulator said.
By making it compulsory for finfluencers to register with SEBI and stick to specific guidelines, the regulator is setting a standard for accountability and expertise in the sector, according to market experts.
The move is meant to ensure that mutual fund houses, research analysts, registered investment advisors and stock brokers do not partner with finfluencers.
On the other hand, a small window has been provided for investor education from such partnerships. This is subject to the condition that these finfluencers do not provide any recommendations or claim any return or performance.
This came amid growing concern over the potential risks associated with unregulated finfluencers who might offer biassed or misleading advice. They usually work on a commission-based model.
Finfluencers have significantly impacted their followers’ financial decisions in the last few years and thus SEBI’s regulatory framework is a move to increase accountability and responsibility for the advice they provide.
To give this effect, SEBI has amended norms governing depository participants, intermediaries and Securities Contracts.
(With Inputs From PTI)
