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SEBI to finalize draft discussion paper on guidelines for finfluencers
Madhabi Puri Buch, Chairperson of SEBI, says that finfluencers who claim that trading can turn someone into a crorepati or lakhpati will be treated as fraudulent and engaging in misleading activities.
According to the paper, SEBI-regulated entities (such as brokers and mutual funds) will be restricted from advertising with unregistered finfluencers. This paper will be made public within two months.
The Securities and Exchange Board of India (SEBI) will soon tighten its grip on financial influencers (finfluencers) as cases of fraudulent market advice on social media continue to rise.
The Chairperson of the market regulator, Madhabi Puri Buch, stated that the board is in the process of finalizing a draft discussion paper that will regulate finfluencers.
According to the paper, SEBI-regulated entities (such as brokers and mutual funds) will be restricted from advertising with unregistered finfluencers. This paper will be made public within two months.
Clarifying that the regulator does not intend to suppress education-related initiatives, Buch added that the board does not have any issues with individuals educating investors or potential investors about the market and investments.
"If you are teaching people, then we have no problem with it. In fact, that is good because we also want to promote investor awareness and education. So, if your genuine intention is to educate people, then we have no problem with that. However, if you are making inducements such as promises of earning lakhs and crores through trading or becoming a lakhpathi or crorepathi in two years... then it will be considered fraudulent and misrepresentation," she said.
She further added that genuine experts know that there are no guarantees in the market, even Warren Buffett has experienced losses.
"If you are an expert and you are telling people that this (trading) is a guaranteed method of making money, then under our system (regulatory framework), that promise will be considered an inducement," she added.
It should be noted that there has been a wave of new-age finfluencers who are amassing millions of followers by producing bite-sized content. This could include videos on saving measures, investment tips, stock portfolios, and financial hacks.
In some cases, the income finfluencers earn from selling trading courses and workshops is even higher than their own trading income.
The regulator is taking note of this. Last month, in the first instance of action against a finfluencer, SEBI fined YouTuber and well-known options trader PR Sundar Rs 6.5 crore and banned him from the market for a year for violating investment adviser norms.
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