The Securities and Exchange Board of India (SEBI) has released a consultation paper on Friday, suggesting that regulated intermediaries should distance themselves from unregistered financial influencers, commonly known as “finfluencers.”
Public Views Sought
The consultation paper seeks public opinions regarding the proposed limitation on the connection between regulated entities and unregistered “finfluencers.” SEBI aims to gather insights on this matter from the public.
Defining Financial Influencers
SEBI defines “financial influencers” or “finfluencers” as individuals who use social/digital media platforms to offer information and advice on various financial topics, such as investments, personal finance, insurance, and real estate. These individuals possess the power to influence the financial choices of their followers.
Restrictions and Disassociation
The paper emphasizes that intermediaries or SEBI-registered entities, along with their representatives, are barred from forming any kind of direct or indirect association with unregistered entities, including financial influencers. This extends to both monetary and non-monetary relationships aimed at promoting their services or products.
Enforcement and Compliance
SEBI’s proposal recommends that registered intermediaries must sever connections with unregistered entities utilizing their name, product, or service. If a SEBI-registered entity identifies an unregistered entity using its name, the former must lodge an official complaint. Registered “finfluencers” must show their valid registration number and contact details, furnish information about the investor grievance redressal helpline, and incorporate relevant disclosures and disclaimers into their posts.
Public Feedback and Regulation Compliance:
The consultation paper welcomes public input on these suggestions, with submissions accepted until 15th September. This move by SEBI echoes the broader trend of increased accountability for influencers. The Advertising Standards Council of India (ASCI) recently revised its guidelines to place greater responsibility on influencers in the health and finance sectors. Influencers endorsing financial products will now need SEBI registration, while those promoting health and nutrition products must hold relevant qualifications.
The Growing Influencers Market in India:
In 2022, the influencer market in India was valued at INR 1,275 Crores. The Department of Consumer Affairs Secretary, Rohit Kumar Singh, predicts it will grow at a Compound Annual Growth Rate (CAGR) of 19-20%. The Ministry of Consumer Affairs recently introduced new endorsement guidelines for social media influencers. These guidelines include fines up to INR 50 Lakhs for non-compliance.
In a changing landscape, online personalities are gaining more influence. SEBI’s proposal seeks to establish transparency, compliance, and integrity in financial advice and services.
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