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SEBI has on come up with a Consultation Paper on the Association of SEBI Registered Intermediaries/Regulated Entities with Unregistered ‘finfluencers’. The objective of this consultation paper is to seek public comments on a proposal to restrict the association of SEBI registered intermediaries/regulated entities with unregistered ‘finfluencers’.
Table of Contents
The reason why this consultation paper was sought is because in recent times, activities of financial influencers (finfluencers) have attracted wide public and media attention. Finfluencers are mostly unregistered entities providing catchy content, information and advice on various financial topics to their several followers. While some have genuine educators, many are effectively unregistered and unauthorised Investment Advisers (IAs) or Research Analysts (RAs). A separate consultation paper proposed a unique fee payment platform for registered IAs and Ras that should help investors identify, isolate and avoid unregistered entities/finfluencers. Other unregistered entities/finfluencers may be effectively enticing the followers to purchase products, services or securities in return for undisclosed compensation from platforms or producers. So this consultation paper seeks to restrict the association of SEBI registered intermediaries/regulated entities with such unregistered finfluencers to curb the flow of such compensation.
An influencer means someone having access to an audience and power to affect such audience’s purchasing decisions or opinions about a product, service, brand or experience because of the influencer’s authority, position, knowledge, or relationship with their audience. The Advertising Standards Council of India has given this definition in its ‘Guidelines for Influencer Advertising in Digital Media’.
Financial influencers are called as ‘finfluencers’. Finfluencers are persons who provide information and/or advice on various financial topics such as investing in securities, personal finance, banking products, insurance, real estate investment, etc through social or digital media platforms/channels and have the ability to influence the financial decisions of their followers. Thus, the activities of finfluencers may deal in areas regulated by financial sector regulators such as SEBI, RBI, PFRDA and IRDA. Finfluencers attract investors/prospective investors through engaging stories, messages, reels and videos on various social media platforms such as Instagram, Facebook, YouTube, Twitter, and LinkedIn.
Those finfluencers who are not registered with the relevant financial sector regulator may not have the requisite qualifications or expertise. Further, not being formally subjected to a financial sector regulator’s code of conduct, they may not disclose any potential conflict of interest such as their association with or interest in the products, services or securities that they promote. Many unregistered/unregulated finfluencers directly or indirectly promote products, services or securities. They induce clients to get these products or services in return for-
SEBI came across situations where SEBI registered intermediaries/regulated entities may rely on such unregistered/unregulated finfluencers to promote their product and services. So it decided to limit the association of SEBI-registered intermediaries/regulated entities and their agents/representatives with unregistered entities (including finfluencers).
Limiting the association of SEBI registered intermediaries/regulated entities and their agents/representatives with unregistered entities
Public comments have been invited in this regard in the following format:
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