SEBI’s new regulations: What to do and not to do on social media?

From Jan 21, 2025, MFDs will have to be careful about what they say on their social media handles.

In a new consultation paper, SEBI said that MFDs 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

Ever since this circular has come out, there has been confusion among a section of distributors on what they can do and cannot do on social media.

Here are do’s and don’ts for MFDs based on the AMFI code of conduct and our interpretation of the current SEBI circular on finfluencers:

• MFDs can continue to run their social media channels provided they do not talk about returns or performance of schemes
• MFDs can post educational content on their social media handles to spread awareness about mutual funds. However, such a video should not promote any particular scheme
• MFDs can only talk about mutual funds with their clients but not on public media. They can continue to give incidental advice with respect to mutual funds
• MFDs can use illustrations based on past performance of benchmarks. Last year, AMFI allowed AMCs to use return expectation in the range of 2%-13% to explain the concept of power of compounding through goal planning, SIP, STP and SWP. However, such an illustration cannot be scheme specific, clarified AMFI
• It is always safer to use AMC approved content to disseminate knowledge
• MFDs should not make any false or defamatory statement about AMC, AMFI, other MFDs and MF schemes
• MFDs should maintain professional decorum and should not participate in transmitting untrue statements or rumours
• MFDs should use social media responsibly with respect to content standards and authenticity
• MFDs should use a tagline – AMFI registered Mutual Fund Distributor in all communication
• Fund houses and their distributors and registered investment advisors cannot engage with finfluencers directly or indirectly

Chokkalingam Palaniappan of Prakala Wealth, Chennai who has over 65k subscribers on YouTube says that MFDs should ensure that they abide by the regulations put forward by SEBI and AMFI with a focus on spreading knowledge about mutual funds. MFDs should refrain from wearing a marketing hat while using social media, he suggested.

Kolhapur MFD Sanket Awate, who has 23 lakh subscribers on his YouTube channel feels MFDs should always use data points from well recognized sources like AMFI. Also, MFDs should not sensationalize any information.