The Securities and Exchange Board of India came out with further clarifications on the finfluencer regulations on Wednesday.
The document on the SEBI website mentions that brokers, mutual funds, investment advisers, exchanges and other market participants cannot be associated with unregistered influencers, either directly or indirectly.
With these stricter guardrails in place, the regulator's aim remains to protect investors from the reaches of misleading financial advice and claims of guaranteed returns.
Firstly, the regulations apply to all SEBI-regulated market participants and in addition to the above-mentioned entities, also affect mutual fund distributors, sub-brokers and marketing agencies working for them.
In simple words, the entities registered with SEBI have been prohibited from associating with non-registered entities, which give stock market recommendations or imply guaranteed returns.
This association includes any financial back and forth, client referrals, sharing of customer information and using services for marketing or promotions. In fact, SEBI has also mentioned that working with an agency that partners with influencers is also banned.
Investor protection remains to be an exception, SEBI has tightened its grip around what the educator can and cannot do. Any investor educator cannot recommend specific stocks and securities, use market data from the last three months to indicate future trends, or make any claims of investor returns.
Another interesting impact of the guardrails might be on advertising and marketing. All SEBI-registered firms are allowed to run advertisements if they have control over where they end up. If they are not able to control where the ads end up and find association with finfluencers, it would constitute a violation.
In cases of violation, SEBI can impose penalties, cancel registrations or bar violators from the market. These regulations came up on Aug 29, 2024 and a further advisory came out on Oct 22, 2024. The regulator asked the registered participants to get their act in order within three months of the October circular and hence these regulation are already in force.
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