Industry
Sebi draws a line in the sand between influencers, educators
Summary
- “You open your mouth and utter a single name (of securities), you stop being an educator and start being an advisor,” Sebi chairperson Madhabi Puri Buch said in response to a query.
Mumbai: Financial influencers are going to be hit harder than expected, with the market regulator clarifying that naming stocks on their social media channels will mark out them out as individuals that regulated entities must avoid.
“You open your mouth and utter a single name (of securities), you stop being an educator and start being an advisor," Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch said in response to a query.
On 27 June, Sebi barred regulated entities such as stock brokers from associating with those providing advice or recommendations, or making claims on the performance of any security; however, those engaged in investor education, and do not advise, recommend, or make claims on share performance are exempted.
Mint had reached out to Buch on the sidelines of an event seeking clarification on how the regulator will identify an investment educator from an influencer. The Sebi move aimed to ensure market integrity by entrusting regulated entities to ensure that people associated with them do not indulge in prohibited activities. Apart from financial educators, Sebi also excluded digital platforms with mechanisms to take preventive and corrective action from its latest move.
Also read | Sebi tweaks stocks’ F&O norms, curbs use of finfluencers
Explaining Buch’s statement, Chirag Shah, senior securities lawyer, said that whatever Sebi says or prescribes will always be open to interpretation.
“What the Sebi chief may have meant is that an educator may use examples or cite company names to explain some topic and that should not lead to their losing immunity. But uttering names with recommendations suggestive of buying or selling would be considered as influencing--there is a very narrow difference", Shah said.
When asked whether Sebi should add more specifications in its circular whenever it is released, Shah responded that Sebi will have to deal with this issue on a case-specific basis. “Technically, no regulation, however verbose, is enough, and sometimes few words also suffice," the lawyer said.
Sebi Norms: The Damocles' Sword for Finfluencers
Sharan Hegde, co-founder of 1% Club, a financial awareness and education platform, said that not mentioning specific names may affect the social media content of the majority of influencers.
“As stated by Sebi, if mentioning any stock or the name of a mutual fund by its specific name, if that constitutes financial advice in a YouTube video or in an Instagram video, then 95% of the influencers will not be able to create content, because most influencers talk about fixed stocks or about their trading strategies," said Hegde. This would be a major blow to spreading financial awareness because talking about the performance of a particular company in hindsight is education, said Hegde, who has over 5.6 million followers on YouTube and Instagram combined.
Also read | Finfluencers must avoid foul play: Sebi
Sebi defined finfluencers first in its consultation paper of August 2023 as people who provide information on financial topics such as stock investment, personal finance, banking, insurance and real estate through social media platforms such as Instagram, Facebook, YouTube, LinkedIn, and X. The consultation paper outlined the difficulties in balancing the spread of financial awareness and ensuring influencers do not dish out misleading advice. The paper sought public comments seeking suggestions to regulate the association between registered intermediaries with finfluencers in the space of financial literacy and business.
In January this year, Sebi expressed its intention to bring finfluencers under the ambit of market rules. In April, it imposed a penalty of over ₹12 crore against a financial influencer Ravindra Bharti for abusing investors’ confidence.
