In a recent move to protect investors, the Securities and Exchange Board of India (SEBI) has updated its regulations to address the risks associated with unregistered financial influencers, commonly known as “finfluencers.” This update comes as part of SEBI’s ongoing efforts to ensure that financial advice is provided by qualified and regulated professionals.
SEBI has taken significant action by removing over 15,000 pieces of content from unregulated financial influencers in the past three months. This effort was supported by technological platforms that acted on SEBI’s request. The regulator’s initiative aims to curb the spread of misleading financial advice and prevent investors from making poor decisions based on unverified information.
Kamlesh Varshney, a SEBI member, explained that these removals are part of a broader strategy introduced in July. This strategy includes new restrictions on interactions between SEBI-regulated entities and unregistered financial influencers. According to SEBI’s latest notifications, regulated entities and their agents are prohibited from engaging in any transactions, client referrals, or IT system interactions with individuals who provide financial advice or make performance claims without SEBI’s permission.
The new regulations specifically state that no SEBI-regulated person or their agents can have any direct or indirect association with individuals who offer financial advice or make performance claims unless the advisor is registered or permitted by SEBI. This measure is designed to prevent conflicts of interest and ensure that all financial guidance is delivered within a regulated framework.
To facilitate investor education, a limited exception has been made for educational content provided by finfluencers, as long as they do not offer specific recommendations or performance claims. This exception is intended to support investor learning while still protecting them from potential misinformation.
Additionally, SEBI plans to introduce a discussion paper by the end of the year to explore changes in regulations for initial public offerings (IPOs) by small and medium enterprises (SMEs). This move aims to support smaller businesses in raising capital and expanding their operations, further promoting a transparent and regulated financial environment.
SEBI’s efforts also include recommendations for future regulatory steps, such as requiring registered financial influencers to display their registration numbers, contact information, investor grievance helplines, and appropriate disclaimers in their content. The consultation paper released last year highlighted the need for such measures and also suggested banning referral fees based on the volume of referrals.
Overall, SEBI’s actions represent a significant step toward ensuring the integrity of financial advice and protecting retail investors from the risks posed by unregulated finfluencers. The regulator’s commitment to creating a safer financial landscape underscores its role in upholding transparency and accountability in the Indian financial market.