SEBI TIGHTENS ITS GRIP

The capital markets regulator is changing tack; it will go after regulated entities that associate with unregistered finfluencers

- NAVNEET DUBEY

THE SECURITIES AND Exchange Board of India (Sebi) has made a series of interventions over the past year to check illegal stock advice being dispensed by financial influencers, or finfluencers, but with limited results. Finfluencer content continues to flourish in the face of repeated strictures from the regulator and the imposition of fines in some instances.

That has prompted Sebi to change tack. At a meeting at the end of June, Sebi’s board decided that it was time to crank the pressure up a notch. It will now impose penalties on entities it regulates if they associate with finfluencers who give stock advice illegally.

Presenting the new framework after that meeting, Sebi Chairperson Madhabi Puri Buch spelt out the changes. “As you know, we have jurisdiction over entities that we regulate,” the Chairperson remarked. It can regulate only registered investment advisors and research advisors who come under its purview.

Such organisations cannot affiliate with individuals who dole out investment advice without getting registered with Sebi. “The second is, irrespective of whether they are registered or unregistered, if they are making claims on portfolio performance, their service performance, etc., unless it is specifically provided for them to be able to give that information… then again, they are breaking the law,” Buch said.

A Sebi-registered broker can buy and sell securities on behalf of clients. Other regulated entities offer securities-related services but may not directly execute trades on the exchange. But Buch made it clear that the rules do not apply to those who are solely engaged in creating educational content.