Bad influence of finfluencers: SEBI sets three-month deadline

The stock market regulator Securities and Exchange Board of India (SEBI) on Wednesday asked recognised stock exchanges, clearing corporations, and depositories to terminate any existing contracts with unregistered financial advisers, such as financial influencers, within three months.

The circular follows its June 27 decision 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.”

‘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 influencers, Mr Hegde said, should also stop paying commissions after this.

Some exemptions

SEBI, however, exempted those engaged in investor education, and those who 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 and curative actions to ensure that it is not used for any activity specifically prohibited by SEBI. 

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 on a financial influencer, Ravindra Bharti, for abusing investors’ confidence.

(By arrangement with livemint.com)