September 28, 2023

SEBI Takes Action Against Unregistered Finfluencers, Plans Regulatory Measures

Market regulator SEBI (Securities and Exchange Board of India) is stepping up efforts to address the growing issue of unregistered financial influencers, known as “finfluencers,” who offer investment advice to the public. These individuals often manipulate the market and exploit gullible investors for personal gains.

SEBI Chairperson, Madhabi Puri Buch, acknowledged the rise of financial influencers and confirmed that SEBI has recently issued orders to tackle this trend. Buch stated that SEBI’s stance on the matter is becoming clearer, and in the coming months, consultation papers will be released to address the most crucial aspects of the issue. These papers will focus on regulating entities such as exchanges, brokers, and mutual funds, prohibiting them from engaging with unregistered influencers through advertising, equity or profit sharing, or referral fees in any form or medium.

This move by SEBI comes after reports of the income tax department sending notices to the top 35 social media influencers for evading taxes worth crores of rupees. Additionally, there were recent searches conducted on the top 13 YouTubers in Kerala for similar offenses.

Buch clarified that SEBI does not have a problem with individuals educating investors or potential investors about the market and investments. However, the concern arises when unregistered influencers offer unsolicited investment advice without being registered with SEBI.

These unregistered finfluencers earn substantial amounts of money through commissions from platforms and by trading stocks they have promoted or demoted. Social media platforms have witnessed a significant increase in the number of such individuals in recent years. SEBI has consistently cautioned the public against falling into the traps set by these influencers and has hinted at the introduction of regulatory measures.

SEBI’s actions highlight the need for stricter oversight and regulation in the financial influencer space. By prohibiting engagement between registered entities and unregistered influencers, SEBI aims to protect investors from potentially misleading and harmful advice. The forthcoming consultation papers will play a crucial role in shaping the regulatory framework to tackle this growing concern.

It is essential for investors to remain cautious and rely on registered financial advisors and reputable sources for investment advice. SEBI’s efforts to address the issue of unregistered finfluencers demonstrate their commitment to safeguarding the interests of the investing public and maintaining the integrity of the Indian financial market.