SEBI To Introduce Consultation Paper To Regulate Unsolicited Stock Advice

Stock exchange regulatory body Securities and Exchange Board of India (SEBI) will reportedly come up with a consultation paper to control unsought financial and stock advice given by unregistered investment advisors and social media influencers. For the same, SEBI to frame guidelines based on the inputs received from the consultation paper. 

Attending a meeting of the Association of Registered Investment Advisers, SEBI member Ananth Narayan Gopalkrishnan said, “We (SEBI) will come out with a discussion paper seeking inputs for making effective measures to control unsolicited financial and market advices from social media influencers and also, from unregulated investment advisors. After inputs from market participants, and other stakeholders, we will issue guidelines to rein them in.”  

Gopalkrishnan stated that some unethical people are misusing SEBI registration to promote their businesses and as a regulator, SEBI would not let this happen, PTI reported.

During the meeting, he shared that unregistered investment advisors are also posing a threat to credulous investors. However, there are also instances of regulated investment advisors misusing SEBI registrations.

“We (SEBI) want self-regulatory bodies to evolve so that some bodies beyond SEBI can do the policing. We are concerned about unregistered investment advisors and social media are enhancing that,” he added.

These developments have come at a time when several social media influencers are seen suggesting stock investments, without procuring a licence. 

Earlier, SEBI in its annual report said that it conducted three search and seizure operations in FY22 (fiscal year 2022) to keep a check on alleged stock investment tips surfaced via the different social media and ‘pump and dump’ schemes. 

With the increase in usage of the internet and social media, such platform influencers and other unregulated investment advisors are sharing stock advice on WhatsApp and Telegram groups, Instagram, Facebook and other social media platforms. 

In late 2022, SEBI wrote a letter to the industry body Association of Mutual Funds in India (AMFI) asking them to monitor social media platforms. 

In its letter, SEBI stated, “Mutual funds shall be vigilant and regularly monitor social media to identify entities, or groups, which camouflage themselves as registered mutual funds, or misuse the names of mutual funds, to lure the investors.” 

While, in March 2022, the securities market watchdog probed certain entities making stock recommendations about listed stocks on Telegram channels. During that time, the regulatory body also asked the general public and investors to be scrupulous and not rely on such unsolicited stock advice, surfacing on social media.

Before that, SEBI held 6 people accusing them of manipulating stock prices via instant messaging apps such as Telegram and WhatsApp.