'Finfluencers' will now be accountable for their investment advice
What's the story
The Securities and Exchange Board of India (SEBI) has revised its regulations to supervise unregistered financial influencers, also known as 'finfluencers.' This decision follows growing concerns about the potential risks associated with such unregulated individuals. The market regulator has issued three separate notifications, outlining the restrictions on associations between its regulated entities and these unregistered individuals.
Rules
Monetary transactions with unregistered individuals prohibited
The new regulations stipulate that individuals regulated by SEBI, and their agents, are prohibited from engaging in any form of association with unregistered individuals. This includes monetary transactions, client referrals, or IT system interactions. The restrictions apply to anyone who directly or indirectly offers advice or guarantees returns on investments.
Regulatory impact
Aim to ensure accountability and expertise
The revised regulations require finfluencers to register with SEBI and adhere to specific guidelines. This move is seen as a step toward ensuring accountability and expertise in the sector. It is designed to prevent mutual fund houses, research analysts, registered investment advisors, and stock brokers from partnering with unregistered finfluencers.
Regulatory exceptions
Exceptions to the new regulations
SEBI's revised regulations do allow for certain exceptions. Registered entities can associate with unregistered ones, if the association is through a SEBI-approved platform that has mechanisms in place to prevent and address violations. Additionally, associations are permitted with individuals solely involved in investor education, provided they do not offer unregistered advisory services or make performance guarantees without permission.
Regulatory focus
SEBI's regulations target unregulated finfluencers
The revised regulations are primarily aimed at unregulated finfluencers who may provide biased or misleading advice. These individuals typically operate on a commission-based model and have significantly influenced their followers' financial decisions in recent years. By implementing these new rules, SEBI aims to hold them accountable for the advice they provide.