Market regulator Sebi is taking steps to regulate the growing number of unregistered financial influencers, known as “finfluencers,” who provide investment advice to the public.
Sebi chairperson Madhabi Puri Buch said the agency is finalizing a draft discussion paper on guidelines for financial influencers and expects it to be ready for public comments within the next few months.
While Sebi recognizes the value of educating investors about the market and investments, concern arises when these influencers offer unsolicited investment advice without proper registration.
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Many unregistered finfluencers manipulate the market and earn substantial commissions from platforms by transacting on the stocks they promote or criticize.
The rise of social media platforms such as YouTube, Instagram, Telegram, WhatsApp, and Twitter has facilitated the proliferation of such influencers.
Sebi has been cautioning the public about falling into their advisory traps and has hinted at introducing regulations to control their activities.
Sebi’s move to regulate finfluencers follows other actions taken by the regulator to address issues related to market manipulation.
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Previously, it has cracked down on WhatsApp groups and Telegram channels that leaked market-moving data.
Additionally, it plans to limit the use of financial influencers by brokers and mutual funds to curb the spread of financial advice through social media advertising and marketing campaigns.
Sebi has been working on regulations for financial influencers since January 2022 but has not yet issued them.
However, the watchdog has taken selective action against manipulators, such as imposing fines and market bans on people and entities found guilty of market abuse and illicit gains.
The recent case involving finfluencer P.R. Sundar marked the first instance of Sebi taking action against a financial influencer.
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Sundar, a YouTuber and options trader, was fined ₹6.5 crore and banned from the market for a year for violating investment adviser norms.
Investigations revealed that Sundar operated a website offering advisory services and collected payments through a linked bank account.
The concerns related to financial influencers have also gained attention from the government.
Finance Minister Nirmala Sitharaman cautioned about the dangers posed by Ponzi apps offering financial solutions, and the Advertising Standards Council has established guidelines for influencers who influence purchasing and investing decisions.
