SEBI Preparing Guidelines To Crack The Whip On Unregistered Finfluencers

The Securities and Exchange Board of India (SEBI) intends to tackle the rising prevalence of unregistered financial influencers or finfluencers, who provide investment advice to the public.

SEBI chairperson Madhabi Puri Buch said that a draft discussion paper, outlining rules and guidelines for regulating such individuals, will be finalised within the next two months.

The decision by the market regulator comes in the wake of recent developments that have put the spotlight on these online celebs for all the wrong reasons. The income tax (IT) department has reportedly issued notices to as many as 35 Indian social media influencers for non-payment of tax, while similar offences prompted authorities to tighten their noose on 13 YouTubers in Kerala last week.

SEBI’s proposed measures aim to address the concerns surrounding unregistered finfluencers and establish a framework that ensures compliance with regulatory standards. By formulating appropriate guidelines, SEBI aims to maintain integrity within the financial advisory space and protect the interests of investors.

“We are crystallising a discussion paper to regulate financial influencers. The paper should be ready for public comments in the next couple of months,” the SEBI chief said at a press briefing held on June 28. 

The announcement followed an extensive meeting where several regulatory measures were approved, including the reduction of share listing time from six days to three days after an initial public offering (IPO).

Explaining the regulatory position, Buch said, “We’ve no problem if someone chooses to educate investors/would-be-investors about the market and investments. But there is a serious problem if they are offering unsolicited investment advice and are not registered with the SEBI.”

Finfluencers Under The Lens

The development comes at a time when a number of cases of unregistered finfluencers manipulating the market and offering potentially misleading advice to individuals have come to light.

Social media platforms such as YouTube, Instagram, Telegram, WhatsApp, and Twitter have become the breeding grounds for these individuals, prompting the market watchdog to caution the public and contemplate regulations to address the issue.

The crash of crypto exchange Vauld last year raised questions over the space as many finfluencers were previously seen freely promoting the platform. 

Then, there was the row related to a fake ‘World Startup Convention’, which was promoted by many startup influencers without verifying the authenticity of the organisers. Many organisers and attendees were left in the lurch after they paid for an event that did not exist altogether. 

Another similar instance came to light after SEBI blacklisted actor Arshad Warsi and 30 others for stock manipulation. 

Amid all this, last month, even Finance Minister Nirmala Sitharaman said that the general public needs to be wary of finfluencers. Prior to that in February, SEBI member Ananth Narayan Gopalkrishnan had hinted that the market watchdog was mulling a discussion paper aimed at controlling unsolicited financial and market advice from social media influencers and unregulated investment advisors. 

Meanwhile, the Advertising Standards Council also established guidelines for influencers who have the power to influence purchasing and investment decisions.