SEBI member SK Mohanty noted that stock tips were flowing freely on social media platforms without any regulation
SEBI is also reportedly looking at mandating registrations for social media influencers, on the lines of rules governing registered financial advisors
Known for breaking down jargon into easy terms for viewers online, finfluencers have been dock for offering financial advice to millions without any oversight or accountability
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Securities and Exchange Board of India (SEBI) official said that the market regulator was looking at framing rules to govern financial influencers who dish out financial advice on social media platforms.
“We are working on the guidelines for financial influencers,” SEBI whole-time member SK Mohanty was quoted by The Hindu businessline as saying.
Mohanty made the comments on the sidelines of an event organised in Mumbai, in what appears to be the market regulator’s bid to tighten the noose around these online celebs, colloquially known as finfluencers. The SEBI member also noted that stock tips were flowing freely on social media platforms without any regulation.
The report also said that SEBI was looking at mandating registrations and other norms for social media influencers, on the lines of rules governing registered financial advisors.
This comes amidst growing scrutiny of these influencers that have mushroomed across social media platforms in the past few years. Largely known for breaking down complex financial jargon into simple terms, these influencers have lately come under fire for unsound financial advice to millions of viewers.
This became especially prominent during the Vauld crisis where multiple finfluencers were paid Lakhs of Rupees, at the outset, to promote its crypto products. But, as the startup declared bankruptcy, many were left high and dry, including those users that had acted on the supposed advice.
There have also been instances where these influencers were allegedly compensated by companies to manipulate stock prices via advice. These finfluencers target users interested across domains ranging from widely known stock markets to emerging technologies such as cryptocurrencies.
Additionally, there have also been concerns about the ‘detrimental’ impact of such influencers during startup listings. The issue has become even more pronounced, especially in times of current market volatility, which has put many companies on edge and investors wary.
SEBI has, in the past, also highlighted its concerns regarding the financial advice floating on social media platforms In September, SEBI chairperson Madhabi Puri Buch called for a ‘segmented approach’ towards dealing with unsolicited social media stock tips.
In March this year, SEBI conducted multiple search and seizure operations across the country in a case related to alleged stock manipulation through social media. Prior to that in January, SEBI held 6 people guilty of stock price manipulation using instant messaging apps such as Telegram and WhatsApp.
Such has been the extent that even the Advertising Standards Council of India (ASCI) has highlighted the trend. Complaints against influencers constituted 28%, or 781 complaints, of the total grievances for the April-September period. Of these, virtual digital assets accounted for 10% of the total influencer complaints.
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