SEBI Proposes Restriction of Registered Intermediaries with Finfluencers in its Consultation Paper The proposals, which are expected to clamp down on the activities of finfluencers and rein in their proliferation, are available on SEBI's website till 15th September, 2023 for public comments and suggestions.
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After the Advertising Standards Council of India (ASCI) revised its influencer advertising guidelines, the market regulator Securities and Exchange Board of India (SEBI) has also come out with its consultation paper on unregistered entities and finfluencers.
For unintiated, finfluencers are those who make content on financial topics on social media channels such as Instagram, Twitter and YouTube. Lately, there has been a surge in influencers, some even amassing millions of followers. And after the regulator fined YouTuber and well-known options trader PR Sundar INR 6.5 crore and banned him from the market for a year for violating investment advisor norm, the debate whether finfluencers should don the advisory cap heated up once again.
Here's what the regulator has proposed in its paper.
1. Registered Intermediaries to stay away from unregistered finfluencers: In the paper, the regulator has proposed that registered intermediaries with the regulator should dissociate themselves from unregistered "finfluencers". It also refrained its registered entities from sharing any confidential information of their clients with any unregistered entities. "No SEBI registered intermediaries or regulated entities or their agents or representatives shall, directly or indirectly, have any association or relationship in any form, whether monetary or non-monetary, for any promotion or advertisement of their services or products, with any unregistered entities (including finfluencers)," reads the paper.
2. Proper disclosure on posts: Further tightening the grip, the regulator has proposed that influencers who are registered with SEBI or stock exchanges or AMFI in any capacity shall display their appropriate registration number, contact details, investor grievance redressal helpline, and make appropriate disclosure and disclaimer on any posts. "They shall also fully adhere to the code of conduct under the terms of their relevant registration."
3. Complying with advertisement guidelines: The consultation paper also talks about such entities complying with the advertisement guidelines issued by SEBI, stock exchanges and SEBI recognised supervisory bodies from time to time.
4. No trailing commission: In the paper, the regualtor also says that SEBI registered intermediaries/regulated entities shall not pay any trailing commission based on the number of referrals as referral fee. Limited referrals from retail clients, and payment of fees for such limited referrals by stockbrokers shall be allowed.
5. Registered entities to take necessary action in case of their names being used by unregistered entitity: The paper also says that the SEBI registered intermediaries shall take active measures to dissociate themselves from any unregistered entity if found using their name, product or service. "They shall take necessary action to bring it to the notice of the enforcement agency concerned to take appropriate action, including filing a case under section 420 of the Indian Penal Code, 1860 for impersonation and fraud, etc. as may be applicable."
The regulator has invited comments and suggestions from the public by September 15. They can email their suggestions at consultationMIRSD@sebi.gov.in