In a draft discussion paper, SEBI makes progress in finalizing its guidelines for finfluencers
The market watchdog in India, SEBI, has stepped up its investigation into WhatsApp groups and Telegram channels engaged in the illicit disclosure of crucial market information. A draft discussion paper that SEBI plans to finish in the next month or two aims to develop regulations and standards for managing the rising number of unregistered financial influencers, or “finfluencers,” who provide investment advice to the general public.
The SEBI action follows the income tax department’s prosecution of the top 35 social media influencers for allegedly dodging millions of dollars’ worth of taxes. The top 13 YouTubers in Kerala were recently searched for similar tax infractions.
The discussion paper’s creation was announced by SEBI Chairperson Madhabi Puri Buch, who also said that it will be made accessible for public input in the next months. Following a thorough board meeting, the board adopted a number of regulatory amendments, including the shortening of the share listing period from six to three days following an initial public offering (IPO).
Additionally, the SEBI board approved tightening the disclosure rules for major foreign portfolio investors. In response to questions concerning the regulatory position, Buch emphasized that although SEBI had no issues with people teaching investors about the market and investing, there was a big problem when unregistered businesses offered unsolicited investment advice.
Self-described financial gurus have proliferated on social media sites like Twitter, Instagram, YouTube, and Telegram, giving stock recommendations and trading ideas without the required qualifications or experience. Unregistered finfluencers, many of whom have large followings of up to a million fans, have been charged with deceiving inexperienced investors during the recent spike in interest in the stock market caused by the COVID-19 outbreak. These finfluencers get fees from platforms by presenting as skilled traders with large portfolios, and they also benefit from the market by engaging in trades involving the companies they recommend or downgrade.
In some instances, finfluencers make more money teaching seminars and courses on trading than they do from their trading activity. PR Sundar, a well-known options trader and YouTuber, was fined Rs 6.5 crore and banned from the market by SEBI last month for breaking the rules for investment advisers. The investigation discovered that Sundar ran the prsundar.blogspot.com website, which offered several packages for advisory services. Sundar is a co-promoter of Mansun Consultancy, which received money via a payment gateway connected to its bank account.
The proactive efforts taken by SEBI are intended to safeguard investors against unregulated financial advice and to make sure that those acting as influencers abide by the relevant legal requirements. The draft discussion paper is anticipated to be essential in establishing finfluencer norms and fostering openness in the financial influencer industry.
