The Securities and Exchange Board of India (SEBI) has released a paper highlighting the need for regulated entities to stay away from unregistered investment advisors, known as finfluencers. In the paper, SEBI proposes to take enforcement action against unregistered finfluencers who breach SEBI regulations. The regulator also plans to disrupt the revenue model for such finfluencers, in order to reduce the perverse incentives in the ecosystem. SEBI has identified cases where registered intermediaries or regulated entities may be using unregistered or unregulated finfluencers to promote their products and services.
SEBI’s focus on regulating and monitoring finfluencers stems from the concern that investors may be misled or influenced by unregistered investment advisors. These finfluencers often provide investment advice through various digital platforms and social media channels, reaching a large number of retail investors. However, as they are not registered with SEBI, they do not adhere to the necessary rules and regulations, which may lead to potential risks for investors.
The proposed measures by SEBI aim to ensure that regulated entities maintain a distance from unregistered finfluencers and refrain from engaging in any activities that could mislead investors. By disrupting the revenue model for these finfluencers, SEBI hopes to reduce the incentives for unregistered individuals or entities to provide investment advice. This will help protect investors and maintain the integrity of the financial markets.
The paper also emphasizes the role of self-regulation in the industry, with SEBI urging registered intermediaries to adopt measures to prevent reliance on unregistered/unregulated finfluencers. SEBI expects regulated entities to implement mechanisms to ensure that their products and services are being promoted responsibly and in compliance with the regulatory framework.
SEBI’s focus on regulating finfluencers highlights the growing influence of social media and digital platforms in the investment landscape. It underscores the need for investor protection and the importance of maintaining transparency and accountability in the financial markets. By bridging the gap between regulated entities and unregistered finfluencers, SEBI aims to create a level playing field and ensure that investors receive accurate and reliable information when making investment decisions.
In conclusion, SEBI’s paper on finfluencers serves as a reminder for regulated entities to be cautious in their engagement with unregistered investment advisors. The proposed measures aim to strengthen investor protection and maintain the integrity of the financial markets. By taking enforcement action and disrupting the revenue model for unregistered finfluencers, SEBI aims to create a more transparent and responsible investment ecosystem.
