The Securities and Exchange Board of India (SEBI) has announced a decisive set of new regulations aimed at regulating the rising influence of “finfluencers” on India’s investment landscape.
Under the new norms, the SEBI regulated entities and their agents are barred for having any association, directly or indirectly, with any unregistered influencers, targeting anyone who makes claims about securities without SEBI’s registration. Additionally, the regulated entities cannot have any transactions involving money, referral of a client, interaction of information technology systems or any other association with the unregulated ones.
However, the above restrictions will not apply to people regulated by the board or its agent for their association with people who are exclusively engaged in investor education, provided they adhere strictly to SEBI’s new guidelines.
The rise of finfluencers in today’s digital world has been far-reaching across India’s retail investor base, extending across platforms like YouTube, TikTok and Instagram. While many finfluencers are knowledgeable and ethical, their activities have also heightened risks of misinformation, unqualified advice and potentially harmful guidance, leading to financial losses and links to discount brokers.
SEBI’s strict new regulations are designed to tackle these risks by ensuring that only qualified and registered individuals provide financial guidance to the wider community. Unregistered influencers will face challenges in monetizing their content, which may lead to a decline in the number of finfluencers who lack proper knowledge or qualifications and ensure that the overall quality of financial advice will increase. It will also bring a layer of protection for retail investors, who will be able to make more informed investment decisions.
Experts have noted that while SEBI may have had good intentions in announcing these rules, their actual implementation will be an extremely difficult task and may infringe on free speech. Shiju PV, Senior Partner at IndiaLaw LLP, has suggested that SEBI should enforce avertising standards on regulated entities and penalize any breaches.
Only time will tell if it SEBIS’ new regulations will be able to meet adequate expectations.
