SEBI Issues Clarifications On Finfluencer Guidelines

SEBI Issues Clarifications On Finfluencer Guidelines

SUMMARY

SEBI has now also brought MFDs, authorised persons, PMS distributors and AIF distributors under the ambit of the new rules

As per SEBI, “association” extends to any “transaction involving money or money’s worth”, client referrals, “interaction of information technology systems” and other allied associations

It is pertinent to note that the regulations governing unregulated influencers already came into force in August last year

The Securities and Exchange Board of India has issued a further set of clarifications on existing guidelines governing finfluencers. 

The market regulator reiterated that brokers, mutual funds, investment advisers, exchanges and other market participants “cannot be associated” with unregistered influencers, neither directly nor indirectly. 

SEBI has now also brought mutual fund distributors, authorised persons, portfolio management services distributors and alternative investment fund distributors under the ambit of the new rules. As per the new clarifications, the managers of these offerings are now liable to ensure compliance with these regulations.

Simply put, entities registered with SEBI have been barred from associating with non-registered entities, which give stock market recommendations or imply guaranteed returns. This association also extends to any “transaction involving money or money’s worth”, client referrals, “interaction of information technology systems” and other allied associations.

Not just this, the new norms now also apply to marketing agencies working for the entities regulated by the SEBI. Effectively, the new rules added that working with an agency that partners with unregistered influencers is also banned. 

It is pertinent to note that the regulations already came into force in August last year. Subsequently, in an October circular, SEBI directed the regulated entities to terminate their existing contracts with unregistered influencers and other entities. 

Now, it has issued stringent rules to further safeguard investor protections and crack the whip on unregistered influencers, doling out “advisory” online. What is interesting about the new clarifications is that they also extend to marketing agencies, which now too will have to comply with such norms. 

However, regulated entities can associate with someone for investor education as long as they do not engage in prohibited activities. That said, SEBI can impose penalties, cancel registrations and bar violators from the market for flouting these norms. 

The crackdown comes amid SEBI cracking the whip on finfluencers in the recent past for running pump and dump schemes. In 2023, 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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