Stock Tips, Investment Advice Given Through Social Media Under SEBI Scanner

The Securities and Exchange Board of India (SEBI) carried out three search and seizure operations in FY22 to put a check on fraudulent stock tips circulated through social media and ‘pump and dump’ schemes, it said in its annual report.

The increase in internet penetration and use of social media and messaging apps has given birth to a new era of stock tips or investment advice where such tips are given on WhatsApp and Telegram groups and also by influencers on Instagram, Facebook, and other platforms. While social media has democratised investing and made it easier for common people to understand the basics, it comes with its own setbacks.

The market regulator said in its annual report that the widespread use of the internet and digital media has further increased the speed at which perpetrators can widely transmit and misuse non-public information.

Earlier in March, SEBI conducted a search and seizure operation on certain entities for making recommendations on select listed scrips on Telegram channels. At that time, the regulator cautioned investors, as well as the common public, to not rely on unsolicited stock tips or investment advice received through social media.

“SEBI is using various technological tools for analysing bulk digital data for data available on the web, like social media data and data from various news sources. The learnings on the basis of cases of manipulation identified are being augmented with technology to further strengthen the surveillance capabilities at Sebi,” the regulator said in the annual report.

While SEBI has been increasingly taking cognisance of the stock tips circulated by unregistered research analysts on social media, the financial influencers have also come under the government scanner.

The government is planning to introduce rules to regulate social media influencers. Under the new rules, it would be mandatory for influencers to make disclosures about their paid reviews or paid promotions.

Moreover, the new guidelines would reportedly penalise the creators and influencers by as much as INR 50 lakh if they do not disclose their financial ties with brands.

Although the Advertising Standard Council of India (ASCI) has released a set of guidelines for influencer marketing, promotion of financial products through online advertising channels remain an unregulated area largely till now, not only in India but also globally as well. 

The onset of the Covid-19 pandemic and stay-at-home mandates gave a boost to stock market and mutual funds investing in India. The presence of startups like Zerodha and Groww made it easier for people to open trading accounts to start investing in stock markets from home. 

The number of demat accounts jumped 63% to 89.7 Mn in FY22, as per media reports. Due to the easy accessibility of fintech platforms, mutual funds and asset management companies (AMCs) also added close to 70 Lakh investor accounts in the first five months of FY23, as per the Association of Mutual Funds in India’s data.

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