SEBI Bars Regulated Entities From Associating With Unregistered Finfluencers

The Securities and Exchange Board of India (SEBI) on Thursday (June 27) barred regulated entities from associating with unregistered finfluencers.

The directions were passed at the markets regulator’s board meeting on Thursday (June 27). 

“The persons regulated by the Board and the agents of such persons shall not have any association… with any other person who… provides advice or recommendation or makes any implicit or explicit claim of return or performance, in respect of or related to security or securities…,” said SEBI in a statement. 

However, players and persons regulated by the markets regulator have been exempted from the ban. SEBI allowed regulated entities to “associate” with entities that do not offer any financial advice and digital platforms that have licence to offer recommendations. 

SEBI also said that regulated entities will be responsible if they partner with unregulated influencers or indulge in such “prohibited activities”.

It also defined prohibited activities as “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”.

The market regulator’s board also approved a proposal to permit Category I and II alternative investment funds (AIFs) to borrow capital for up to 30 days for meeting temporary shortfall in drawdown from investors while making investments.

“The cost of any such borrowing would need to be charged to the specific investors responsible for the shortfall. Further, with a view to curtail any possible roll-over of borrowing, there shall be a cooling off period of thirty days between two borrowings availed by Category I and II AIFs,” added SEBI. 

The board of the markets regulator also approved a plan to limit extension of LVF (Large Value Funds for Accredited Investors) tenure to five years. It said that the extension would be contingent on the approval of two-thirds of the unit holders by value, as per SEBI. 

At the board meeting, the SEBI board also revised the eligibility criteria for entry and exit of stocks in the derivatives markets. Under the latest mandates, the criteria for exit shall apply to only those stocks which have completed at least 6 months from the month of entry into the derivative segment.

“In addition, a Product Success Framework has been introduced in single stock futures and options, to ensure that the liquidity and participation witnessed in the derivative markets are supportive of market development, regulation, and investor protection. The Product Success Framework would start to apply 6 months from the date of issuance of the circular,” added SEBI.

This comes weeks after brokerage firm JM Financial said that it expects Jio Financial Services and Zomato to be included in the Nifty index if added to futures and options markets.

On top of that, SEBI also streamlined the process for applying for public issue of debt securities via intermediaries. 

“Harmonisation of the procedure of applying in public issue of debt securities and NCRPS (non-convertible redeemable preference shares) through intermediaries with that in case of specified securities by mandating UPI for individual investors where the investment is up to INR 5 Lakhs,” it said. 

The developments come in the backdrop of SEBI cracking the whip on finfluencers in the recent past. Just last year, the regulator barred Hyderabad-based finfluencer Mohammad Nasiruddin Ansari from participating in securities markets while also mandating the disgorgement of INR 17.2 Cr. 

In May 2023, it also penalised PR Sundar for offering investment advisory services without SEBI registration since 2013. 

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