SEBI in talks with Google, Telegram to crack down on unregistered finfluencers: Sources

SEBI in talks with other social media platforms for crackdown on unregistered finfluencers.

Market regulator Securities and Exchange Board of India (SEBI) is in talks with big social media platforms like Google and Telegram for curbing the activities of unregistered investment and stock market advertisers, say sources. SEBI, in a response to Moneycontrol query about the strategy to deal with advices given on social media platforms by unregistered finfluencers, said, “We are thankful to all those who are co-operating in reducing this risk. Talks are in progress with other (social) media platforms as well”.

SEBI further stated in the response that, “SEBI has adopted a multipronged strategy in the recent past to reduce the risk arising out of advices given by unregistered finfluencers. Collaborating with social medial platform is an integral part of this strategy”.

Regulatory sources said the social media platforms are largely co-operative and have given a favourable response. It is expected that most of them will come up with some kind of measures to deter the elements that are misusing such platforms against the investors and causing loss to them. One regulatory source said, “Platforms which are not falling in line may not get business with SEBI regulated entities as regulated entities may like to associate with platforms, which are aligned with SEBI's objective of curbing unregistered finfluencers."

Google and Telegram did not reply to the queries about ongoing discussions with SEBI on the issue of verification and other measures under consideration.

Many recent orders of the SEBI suggest that YouTube, Telegram and WhatsApp channels have been frequently used by many fraudsters to scam the investors. YouTube videos were used in many cases to create hype and fake narrative about the unknown type companies with no fundamental business and financials to trap the innocent investors. Similarly, Telegram and WhatsApp channels were used to give calls with intention to trap the investors.

Also read: Crackdown on ‘furus’ starts: Meta mandates SEBI verification for investment ads 

SEBI regulation mandates that regulated entities must not associate with unregistered finfluencers for monetary relationships, digital collaborations, marketing or referral fee arrangements. This restriction is for both direct and indirect association. It eliminates the chances of sponsorships or any other fee income through endorsements that finfluencers might get for promotion of investment product or services.

In the amended intermediary regulations, SEBI has also clarified the meaning of association in this regard and says, association shall mean a transaction involving money or money’s worth, referral of a client, interaction of information technology systems, or any other association of a similar nature or character.

However, such restriction will not be applicable in case of association through a specified digital platform. As per SEBI a specified digital platform is a platform which has a mechanism in place to take preventive as well as curative action, to ensure that such a platform is not used for indulging in giving tips or advice related to securities unless the person is registered with SEBI and makes any claims of guaranteed return or any other unreasonable performance.

Terming the investor awareness as another key tool for protection of investors, SEBI in its response said, “We continue to caution investors advising them to exercise due diligence before accepting any tips/advice and while acting in response to any social media post guaranteeing fixed returns.”

Last week, Meta mandated that advertisers must verify before posting advertisements on Facebook, Instagram, WhatsApp like platforms. Meta has mandated advertiser verification for all securities and investment-related ads that target Indian users starting from July 31 in a major crackdown on fake market advisors and investment gurus.

As part of updated terms of service announced on June 26, Meta—the parent firm of Facebook, Instagram, WhatsApp, and Messenger—said all advertisers running investment ads in India, including global campaigns aimed at Indian audiences, must verify the person or entity benefiting from and paying for the ad by submitting valid SEBI registration details.