SEBI To Clamp Down On Finfluencers Collaborating With Regulated Entities

In a consultation paper released on Friday, the Securities and Exchange Board of India (SEBI) proposed that regulated intermediaries should dissociate themselves from unregistered financial influencers, also known as “finfluencers”.

The paper seeks views from the public on the proposal to restrict the association of regulated entities with unregistered “finfluencers”.

According to the market regulator, “financial influencers”, commonly referred to as “finfluencers”, are persons who provide information and/or advice on various financial topics such as investing in securities, personal finance, banking products, insurance, real estate investment, etc. through social/digital media platforms/channels, and have the ability to influence the financial decisions of their followers, the market regulator defined.

The paper indicates that intermediaries or regulated entities registered with SEBI, along with their agents or representatives, are prohibited from having any form of direct or indirect relationship, whether monetary or non-monetary, for promoting or advertising their services or products with unregistered entities, including financial influencers.

The paper further elaborates that intermediaries registered with SEBI should proactively sever ties with any unregistered entities that are using their name, product, or service. Additionally, the regulatory body recommends that if an unregistered entity is found to be using the name of a SEBI-registered entity, the registered entity should file a formal complaint.

For finfluencers who are registered with SEBI, stock exchanges, or AMFI, it will be mandatory to show their valid registration number and contact details, along with information about the investor grievance redressal helpline. Additionally, they must include proper disclosures and disclaimers in their posts.

“Such entities shall comply with the advertisement guidelines issued by SEBI, stock exchanges and SEBI recognised supervisory body from time to time,” the paper added.

The market regulator has invited public comments on the proposals which can be submitted by 15 September.

Last week, the Advertising Standards Council of India (ASCI) revised its influencer advertising guidelines to place additional responsibility on health and finance influencers.

As per amended guidelines, financial influencers, operating within the BFSI realm, will require SEBI registration; influencers that endorse products in health and nutrition must hold relevant qualifications. Their registration numbers should be conspicuously displayed alongside their names and qualifications.

For other financial advice, influencers must possess appropriate credentials like a license from the Insurance Regulatory and Development Authority of India (IRDAI), qualifications as a chartered accountant, or a company secretaryship, among others.

Earlier this year, the Ministry of Consumer Affairs also released new endorsement guidelines for social media influencers, making them liable to fines up to INR 50 Lakhs if not adhered to.

The size of the social media influencer market in India stood at INR 1,275 Cr in 2022 and is expected to grow at a CAGR of 19-20% to reach INR 2,800 Cr by 2027, the Department of Consumer Affairs Secretary Rohit Kumar Singh said earlier.

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