In a move to regulate the rapidly growing field of financial influencers, the Securities Exchange Board of India (SEBI) has issued a consultation paper proposing restrictions on the association of SEBI-registered intermediaries and regulated entities with unregistered “finfluencers”.
“In recent times, activities of financial influencers … have attracted wide public and media attention. These finfluencers are usually unregistered entities providing catchy content, information and advice on various financial topics to their several followers,” said the SEBI consultation paper.
“While some of them may be genuine educators, many of them are effectively unregistered and unauthorised investment advisers (IAs) or research analysts (RAs).”
The paper said other unregistered entities/finfluencers effectively enticed their followers to purchase products, services or securities in return for undisclosed compensation from platforms or producers.
The paper proposed to restrict the association of SEBI-registered intermediaries/regulated entities with unregistered finfluencers, disrupting the influencers’ revenue model, and to reduce “perverse” incentives within the ecosystem.
According to the SEBI, a unique fee payment platform for registered IAs and RAs would help investors identify, isolate and avoid unregistered entities/finfluencers.
The proposed measures include prohibiting registered entities from associating with unregistered finfluencers for any promotional activities, and ensuring that registered finfluencers display their registration details and adhere to a code of conduct.