SEBI Tightens Regulations on Financial Influencers

In a significant move aimed at safeguarding investors, the Securities Exchange Board of India (SEBI) has introduced stringent regulations for financial influencers, commonly known as ‘finfluencers’, who operate without registration on social media platforms. This decision comes in the wake of increasing concerns about the potential risks these influencers can pose to unsuspecting investors. Last month, SEBI’s board approved several changes, leading to the implementation of regulations that limit interactions between registered entities and unregistered influencers.

Crackdown on Unregulated Platforms

Kamlesh Varshney, a full-time member of SEBI, revealed that the regulatory body has shut down over 15,000 platforms linked to unregistered financial influencers in the past three months. This action was taken to protect investors from potentially misleading financial advice. These platforms were deactivated following SEBI’s directives to technology service providers, underlining SEBI’s commitment to ensuring that financial guidance comes from reliable and regulated sources

Specific Restrictions Imposed

According to the new guidelines, individuals and entities regulated by SEBI are prohibited from engaging in financial transactions, client referrals, or integrating their information technology systems with any unregistered persons who offer financial advice or claim to provide returns on investments. SEBI’s recent notifications clarify that no regulated individual or their agents should associate in any manner with unregistered advisors unless these advisors are registered with SEBI or have specific authorization from the board.

A Narrow Window for Collaboration

Despite the strict regulations, SEBI has allowed a small leeway for investor education through collaborations with finfluencers. This is strictly on the condition that these influencers do not provide any specific investment recommendations or promise returns. This measure aims to protect retail investors, who are often the most susceptible to being influenced by biased or misleading information, which finfluencers may circulate to earn commissions.

Implications for Content Creators and Influencers

These developments are crucial for content creators and influencers who engage with financial content. It underscores the importance of complying with regulatory standards and obtaining the necessary approvals from SEBI before disseminating any financial advice or claims. For young readers and upcoming finance experts, this scenario highlights the evolving landscape of financial advising and the increasing scrutiny on digital platforms. The measures are expected to foster a more transparent and accountable environment for financial advising, ensuring that advice received by investors is both accurate and reliable.