Sebi asks market entities to dissociate from ‘finfluencers’ in 3 months

The market regulator on Wednesday asked regulated entities—including recognized stock exchanges, clearing corporations, and depositories— to terminate any existing contracts with unregistered financial advisers like financial influencers within three months.

The latest circular of the Securities and Exchange Board of India (Sebi) follows its decision of June 27 to bar association with unregistered content creators who offer advice or recommendations or make claims on the performance of any security.

After Sebi’s consultation paper, finfluencers had stopped working with regulated entities, which had also started to cut down business with them, said Sharan Hegde, co-founder of 1% Club, a financial awareness and education platform. “It is just a final brick in the wall to end it.”

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Impact on finfluencers

‘Mega finfluencers’ had stopped all affiliations with regulated entities already, so they would not be as affected, he said. “This move will put a full stop to smaller influencers that were involved.”

The trading platforms that have pre-existing affiliate links with finfluencers, Hegde said, should also stop paying commissions after this.

Sebi, however, exempted those engaged in investor education, and do not advise, recommend or make claims on share performance. It also excluded associations made through a “specified digital platform”, which has a mechanism in place to take preventive as well as curative action to ensure that it is not used for any activity specifically prohibited by Sebi. The regulator’s draft circular inviting public feedback on the criteria had laid out for recognizing digital platforms as specified digital platforms (SDPs).

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In its consultation paper of August 2023, Sebi defined finfluencers 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 paper outlined the difficulties in balancing the spread of financial awareness and ensuring influencers do not dish out misleading advice.

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.