Setback For 'Finfluencers' As SEBI Cracks Down On Unverified IPO Information

The Securities and Exchange Board of India introduced new regulations on Friday requiring IPO-bound firms to create audiovisual presentations of disclosures related to their respective public issues. These videos will specifically advise investors against relying on information from financial influencers, or "finfluencers".

The latest circular by the markets regulator mandates that all Initial Public Offering aspirants must produce AV presentations to enhance investor awareness and understanding of public issues. The primary goal is to caution investors about the dangers of unauthorised and unsolicited information disseminated by finfluencers.

The AV presentations must include key details from the draft red herring prospectus, red herring prospectus, and price band advertisements, ensuring the content is clear, factual and not misleading, the circular said.

As per the circular, the content of the AV shall contain the following disclosure to investors—“Investors are advised not to rely on any other document, content or information provided in respect to the public issue on the internet/online websites/social media platforms/micro-blogging platforms by finfluencers."

The circular comes based on the public comments received from various stakeholders on the draft circular on this subject, that was released on March 19 and sought comments.

The duration of each bilingual version of the AV shall be approximately 10 minutes. It shall initially be in bilingual format i.e. English and Hindi, and shall be prepared and placed in the public domain for all main board public issues.

The provisions of this circular shall be made applicable to all DRHP filed with the market regulator—on or after July 1, on a voluntary basis, and Oct. 1 onwards on a mandatory basis.

This crackdown comes at a time when the regulator has been planning to bring finfluencers under the regulatory ambit and market norms, and aims to introduce a performance validation agency to back claims of higher returns often cited by finfluencers to draw-in investors.

SEBI Chairperson Madhabi Puri Buch, at a recent event, said that once the performance validation mechanism is approved, the regulator will have a wider set of regulations related to who is a finfluencer and what regulated entities are allowed to do.

Over the past year, the regulator has already put restrictions on finfluencers providing illegal stock investment advice through social media. It has restricted regulated entities, brokers and mutual funds from associating with unregistered finfluencers or using the services for promotion of their products.