The Indian financial regulator, SEBI, has identified 8,890 instances of unlawful or misleading content on social media and has directed large platforms to pursue legal action against anyone disseminating such securities market-related content. This information was shared with the Rajya Sabha on July 30.
Cyril Amarchand Mangaldas partner Vasudha Goenka emphasizes the importance of regulating advice on social media due to its vast reach. She points out that anyone can offer advice on these platforms, leaving investors uncertain about the credibility of the information. Given SEBI’s mandate to protect investor interests, strict measures are anticipated to ensure access to accurate and reliable financial information.
SEBI has been actively intervening in the capital markets to address misinformation, including illegal stock advice and misleading financial content by financial influencers, often referred to as “finfluencers.” Singhania & Co. partner Rajiv Sharma explains that these influencers are popular among small retail investors for advice on investments, financial products, and personal finance.
The relationship between influencers and unregistered companies, such as intermediaries registered with SEBI, is the subject of a consultation paper published by SEBI on August 25, 2023. Sharma highlights SEBI’s recognition of the educational value provided by authentic influencers while also noting efforts to curb misinformation from unregistered ones.
The popularity of influencers is on the rise, but their advice may not always be accurate or reliable, as seen in cases like Sharp Line Broadcast Limited, where YouTube creators were found providing misleading information, leading to market manipulation. To address this concern, SEBI is set to introduce new regulations targeting influencers, aiming to prevent unqualified and unregistered individuals from offering financial advice and marketing financial products.
Experts emphasize the need to regulate rather than prohibit influencers, as this approach can protect investors from misinformation, especially in a country like India where financial literacy rates are low. The proposed rules aim to ensure that SEBI-registered entities adhere to a regulatory code of conduct when engaging with influencers, thus safeguarding consumers, providing market stability, and preventing fraud.
The risks of unregulated advice, including market manipulation and unethical practices, underline the importance of these new regulations, which will protectsmall retail investors and uphold the integrity of the financial ecosystem.
To safeguard investors, SEBI has decided that only experienced, registered professionals should offer investment guidance. Amit Mishra, the founder of Svarniti Law Offices, stated that this move aims to ensure thorough assessment, investor security, risk transparency, and regulatory oversight in the financial advisory space.
