SEBI Bans Regulated Entities from Associating with Unregistered ‘Finfluencers’

The Securities and Exchange Board of India (SEBI) has proposed new measures to restrict the association of regulated entities with unregistered financial influencers, commonly known as “finfluencers.” This initiative aims to protect investors and ensure that credible and regulated sources provide financial advice and promotions

The Rising Influence of Finfluncers

In recent years, financial influencers have gained significant traction on social media platforms such as Instagram, YouTube, and Twitter. These individuals often provide advice on investing, personal finance, and other financial products, sometimes in exchange for undisclosed compensation from various platforms and producers. While some finfluencers may offer genuine educational content, others have been criticized for misleading investors and promoting financial products without proper authorization.

SEBI proposes restriction

To curb the influence of unregistered finfluencers, SEBI has proposed that no SEBI-registered intermediaries or regulated entities, including brokers and mutual funds, should have any direct or indirect association with unregistered entities for promoting their services or products. This includes both monetary and non-monetary relationships. The paper suggests that regulated entities should only engage with SEBI-registered investment advisors or research analysts.

Furthermore, SEBI mandates that registered finfluencers display their registration number, contact details, and investor grievance redressal helpline on their posts. They must adhere to a strict code of conduct to ensure transparency and accountability in their promotions. SEBI has also invited public comments on these proposals, which can be submitted by September 15, 2024.

Conclusion:  SEBI’s proposed ban on partnerships between regulated entities and unregistered finfluencers represents a significant step toward ensuring transparency and accountability in financial promotions. The regulated persons and their agents cannot engage in transactions involving money with unregistered individuals. These measures will not only safeguard investors from potentially misleading advice but also uphold the credibility of financial influencers who operate within legal and ethical boundaries. By fostering a more transparent and responsible financial ecosystem, SEBI’s regulations will contribute to building greater trust in the financial markets, ultimately benefiting both investors and the broader economy. This initiative underscores SEBI’s commitment to maintaining market integrity and protecting investor interests in an increasingly digital world.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.