Listen to this article
In a consultation paper issued today, SEBI said that the mutual fund distributors and associated persons of the asset management companies will also fall under the new regulations in which SEBI has advised its intermediaries not to be associated directly or indirectly with a person or entity making claims on performance and returns.
With this, MFDs or any associated person cannot carry out these two activities:
- Providing unsolicited recommendation
- Making any claims on returns or performance of capital market products like stocks and mutual funds
In an FAQ on whether the mutual fund distributors and authorised persons will have to comply with the finfluencer guidelines, SEBI said, “Yes, MFDs and APs are agents of Asset Management Companies (AMCs) and stock brokers respectively who are covered under the definition of “person regulated by the Board”. Hence, they are required to comply with these regulations. AMCs and stock brokers being persons regulated by the Board are responsible to ensure compliance of their agents with these regulations.”
Further, SEBI has clarified that it is the responsibility of AMCs to ensure compliance of their MFDs and associated persons with these regulations.
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.
Defining what falls under investor advice, the market regulator said that a person engaged in investor education cannot use recent data point of the past three months to talk about a security or scheme. It said, “A person engaged solely in education shall mean that such person is not engaged in any of the two prohibited activities, such person should not be using the market price data of the preceding three months to speak/talk/display the name of any security including using any code name of the security in his/her talk/speech, video, ticker, screen share etc. indicating the price, opinion, advice or recommendations related to security or securities. If the name of any security or the market price data is used for the purpose of education, such market price data may be used with a lag of at least three months.”
These regulations will come into effect from Jan 21, 2025.
