SEBI Ordered Market Participants To Close Business With Finfluencers’ in 3 months

On October 23, 2024, the Securities and Exchange Board of India (SEBI) directed regulated entities—including recognised stock exchanges, clearing corporations, and depositories—to terminate any contracts with unregistered financial advisers, such as financial influencers, within three months.

This circular follows SEBI’s June 27 decision to prohibit associations with unregistered content creators who provide advice or claims about the performance of any securities.

Impact on Financial Influencers 

While major influencers, referred to as “mega finfluencers,” have already severed ties with regulated entities, smaller influencers will likely face significant consequences from this move. According to market expert Hegde, trading platforms that have existing affiliate links with these influencers should also cease commission payments.

SEBIhas made exceptions for individuals involved in investor education, provided they do not offer advice or claims regarding stock performance. Additionally, associations made through specified digital platforms—which have mechanisms to prevent prohibited activities—are also exempted. SEBI’s draft circular previously invited public feedback on the criteria for recognizing these specified digital platforms (SDPs).

In its August 2023 consultation paper, SEBI defined finfluencers as individuals who share financial information on platforms like Instagram, Facebook, YouTube, LinkedIn, and X. The paper highlighted the challenge of promoting financial awareness while preventing misleading advice.

Earlier this year, SEBI signalled its intent to regulate finfluencers, imposing a penalty of over ₹12 crores in April against financial influencer Ravindra Bharti for exploiting investor trust.

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.