Sebi working on guidelines to govern financial influencers on social media

The market regulator is putting together rules to govern the growing base of financial influencers who put out advice on social media, a top official said.

“We are working on the guidelines,” SK Mohanty, whole time member of the Securities and Exchange Board of India, said on the side-lines of an event on corporate governance in Mumbai.

There has been a spurt of online influencers in India doling out financial and investment advice even though they may not be qualified to do so. The impact of such influencers has been detrimental at times, especially in the case of recent startup listings.

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Additionally, there have been instances of influencers compensated by companies to crank up their stock prices through advice. The appeal of such financial influencers is mainly through their ability to break down complex financial jargon into simple terms.

However, SEBI’s rules require financial advisors to register themselves and this lends credibility. There are about 1,300 registered investment advisors in India.

The rise of financial influencers has been a dilemma for SEBI. In FY22, there were 415 instances of violations by influencers and celebrities in finance- and cryptocurrency-related content.

SEBI chief Madhabi Puri Buch said after a board meeting in September that it is a challenge to define a financial influencer. Also, in the absence of a financial contract and adequate disclaimers, the regulator cannot go after such individuals.

SEBI has already cracked down on cryptocurrency advertisements by celebrities.