The Securities and Exchange Board of India (SEBI), India’s stock market regulator, has introduced a new rule to help investors make informed decisions during public offerings (IPOs) like stock launches. This new rule targets the influence of social media personalities giving financial advice, often called “finfluencers.”
Starting July 1st, 2024, companies launching IPOs will have the option to present crucial information about the offering in an easy-to-understand audio-visual (video) format. This is voluntary for the initial period. However, from October 1st, 2024, it will become mandatory for all IPOs.
SEBI is concerned that some finfluencers might be promoting certain companies during IPOs without fully explaining the risks involved. These influencers might be motivated by personal gain, and investors could be misled by their recommendations.
The audio-visual presentations will explain the key details of the IPO in a clear and concise way. This will make it easier for investors, especially those unfamiliar with financial jargon, to understand the potential risks and rewards of investing in the particular IPO.
The exact details haven’t been finalized yet, but the presentations are expected to cover important aspects like the company’s financial health, its future plans, and the risks associated with the investment. Additionally, the presentations will likely include a disclaimer advising investors not to solely rely on information found on social media, including recommendations by finfluencers.
While finfluencers can still offer their opinions on IPOs, SEBI new rule aims to ensure that investors have access to accurate and unbiased information directly from the companies themselves. This will help investors make informed decisions based on factual information rather than solely relying on potentially biased advice from social media personalities.
Overall Impact
This new rule from SEBI is a positive step towards empowering investors in the Indian stock market. By providing clear and accessible information through audio-visual presentations, investors will be better equipped to make informed investment decisions during IPOs. This can help to reduce the risk of investors being misled by potentially biased financial advice circulating on social media.