The Securities and Exchange Board of India (SEBI) recently announced new regulations for finfluencers (financial influencers). These finfluencers provide financial advice and suggestions on social media, impacting investors’ decisions. SEBI’s move aims to regulate these activities and protect investors.
In this article, we will discuss SEBI’s new rules in detail and understand how they can benefit investors.
Role of Finfluencers
Finfluencers are individuals who offer financial advice and investment tips on various social media platforms like YouTube, Instagram, and Twitter. They provide financial information to their followers. However, advice from some of these finfluencers has resulted in significant losses for many investors.
According to a report by Kofluence, the BFSI sector holds approximately 15.4% of India’s influencer marketing space. Another report by the Advertising Standards Council of India (ASCI) indicates that 79% of internet users trust social media influencers, with 30% placing complete trust in them.
SEBI’s Actions
On July 30th, SEBI informed the Rajya Sabha that as of July 17th, it had identified 8,890 misleading or unlawful stock market posts on various social media platforms. SEBI has issued notices to major platforms like Facebook, Instagram, Telegram, and YouTube to take strict action against the accounts spreading these posts.
Additionally, SEBI has banned any collaboration with unregistered financial advisors. Several well-known financial influencers have already faced action from SEBI, including trading bans and hefty fines.
Rules for Financial Influencers
In a draft circular issued in May 2024, SEBI directed Investment Advisors (IA) to provide information about their social media accounts, pages, and channels twice a year. SEBI will soon implement rules for financial influencers. SEBI Chairperson Madhabi Puri Buch announced at an event at the National Stock Exchange (NSE) on July 30th, “We recently had a regulation which we will be notifying soon on these issues of influencers,” said the SEBI Chairperson.
Currently, no registered company can provide stock market advice in collaboration with an unregistered financial influencer. SEBI has also prohibited any such transactions, client referrals, or IT system interactions.
Benefits for Investors
SEBI’s steps can be highly beneficial for investors. Firstly, these actions will increase the transparency of financial advice from finfluencers, ensuring that investors receive accurate and reliable information. Secondly, finfluencers will be accountable for their advice, reducing the chances of misinformation. This will help protect investors from misleading information and encourage thorough research before making investments.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*This article is for informational purposes only. This is not investment advice.
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