The Securities and Exchange Board of India (SEBI) is taking steps to address the growing prevalence of unregistered financial influencers, popularly known as “finfluencers,” who offer investment advice to the public. SEBI Chairperson Madhabi Puri Buch announced that a draft discussion paper outlining regulations for these individuals will be finalized within the next two months.
This move by the market regulator follows recent incidents that have highlighted the actions of these online celebrities in a negative light. The Income Tax (IT) department has reportedly issued notices to 35 Indian social media influencers for non-payment of taxes. Additionally, authorities in Kerala recently cracked down on 13 YouTubers for similar offenses.
SEBI’s proposed measures aim to tackle concerns surrounding unregistered finfluencers and establish a regulatory framework that ensures compliance with industry standards. By introducing appropriate guidelines, SEBI aims to maintain the integrity of the financial advisory space and protect the interests of investors.
During a press briefing on June 28, the SEBI chief stated, “We are finalizing a discussion paper to regulate financial influencers. The paper should be ready for public comments in the next couple of months.”
This announcement followed a comprehensive meeting where several regulatory measures were approved, including the reduction of share listing time from six days to three days after an initial public offering (IPO).
Chairperson Buch clarified the regulatory standpoint, stating, “We have no problem if someone chooses to educate investors or prospective investors about the market and investments. However, there is a serious problem if they offer unsolicited investment advice without being registered with SEBI.”
This development comes at a time when several cases of unregistered finfluencers manipulating the market and providing potentially misleading advice have come to light. Social media platforms like YouTube, Instagram, Telegram, WhatsApp, and Twitter have become breeding grounds for these individuals, prompting SEBI to caution the public and consider regulations to address the issue.
Instances such as the collapse of crypto exchange Vauld, where finfluencers had actively promoted the platform, and the controversy surrounding a fake ‘World Startup Convention’ promoted by startup influencers without verifying its authenticity, have raised concerns about the influence and credibility of finfluencers.
Last month, Finance Minister Nirmala Sitharaman advised the general public to be cautious of finfluencers, and in February, SEBI member Ananth Narayan Gopalkrishnan hinted at the possibility of a discussion paper to regulate unsolicited financial and market advice from social media influencers and unregulated investment advisors.
In addition to SEBI’s efforts, the Advertising Standards Council has also established guidelines for influencers who have the power to sway purchasing and investment decisions.
