Freedom of speech is fine, it must not cross the line, Sebi chief hits out at finfluencers

The market regulator supports freedom of speech, but that should not cross a line, Sebi chairperson Madhabi Puri Buch said about finfluencers at the Global Fintech Fest 2023.

"We respect freedom of speech. We respect genuine education. But if it crosses a line and becomes enticement, entrapment and fraud, then we have a problem with it," Buch said.

"If you (finfluencer) are not following our rules, then people who do follow our rules cannot be associated with you. If you wish to partner with Sebi-regulated entities, then please register with us."

Financial influencers, commonly called ‘finfluencers’, provide advice on various topics such as investing in securities, personal finance, banking products, insurance and real estate investment, through social or digital media platforms. They are considered to have the ability to influence the financial decisions of their followers.

Finfluencers promoting F&O trading, promising bewildering returns and giving stock tips without a valid licence have recently become rampant on X, YouTube and Instagram.

Several investigations by Moneycontrol have found these finfluencers associated with broking firms or mutual fund houses that are registered with the Securities and Exchange Board of India (Sebi).

To curb this and protect retail investors, the markets regulator on August 25 released a consultation paper that seeks views from the public on the proposal to restrict the association of regulated entities with unregistered finfluencers.

The paper suggested that the finfluencers who are registered with Sebi, stock exchanges or the Association of Mutual Funds in India (AMFI) "shall display their appropriate registration number, contact details, investor grievance redressal helpline, and make appropriate disclosure and disclaimer on any posts".

Buch also lashed out to platforms that make trading look easy and lure investors in. "You are building a product that seduces people, makes people lose their shirt, lose their hard-earned money. Would you recommend your service to your mother-in-law?" she questioned.

According to a Sebi study, nine out of 10 equity F&O traders lose money, 84 percent of them are men and 75 percent under 40 years of age.