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Acting tough against social media financial influencers or finfluencers, SEBI has directed the market intermediaries which include mutual fund companies and their distributors and registered investment advisors not to engage with finfluencers directly or indirectly.
The decision was made during the board meeting of SEBI held today in Mumbai.
SEBI defined finfluencer as a person who provides unsolicited advice or recommendation or makes any implicit or explicit claim of returns and performance with respect to security market products.
The market regulator said that market intermediaries cannot pay any monetary or non-monetary compensation to such individuals, directly or indirectly. SEBI said, “The persons regulated by the Board and the agents of such persons shall not have any association, like any transaction involving money or money’s worth, referral of a client, interaction of information technology systems or any other association of similar nature or character, directly or indirectly, with any other person who, directly or indirectly, provides advice or recommendation or makes any implicit or explicit claim of return or performance, in respect of or related to security or securities unless permitted by the Board to provide such advice/ recommendation/claim.”
SEBI Chairperson, Madhabi Puri Buch said that SEBI regulated entities cannot associate with people who are not registered with SEBI as investment advisors or research analysts and still offering investment advice. Also, irrespective of whether a person is registered or unregistered with SEBI, if he/she makes claim of performance or return (unless he/she is specifically provided for to be able to such information) then he/she is breaking the law and regulated entities can’t work with them, she added.
However, SEBI clarified that such a restriction will not be applicable for persons who are engaged in investor education and do not directly or indirectly provide advice.
Also, the market intermediaries can be associated with a digital platform, which has a mechanism in place to take preventive action against such finfluencers and ensure that their platform is not used by persons offering advice, recommendation or claim of return or performance.
SEBI said that it will be the responsibility of the person regulated by the Board to ensure that the person with whom it or its agent is associated does not indulge in such prohibited activities.
