SEBI Progresses Towards Finalising Guidelines For Finfluencers In Draft Discussion Paper – News18

India’s market regulator, SEBI, has intensified its crackdown on WhatsApp groups and Telegram channels involved in the unauthorized leakage of critical market data. Additionally, SEBI is set to finalize a draft discussion paper within the next month or two, aiming to establish rules and guidelines for overseeing the increasing number of unregistered financial influencers, commonly known as “finfluencers,” who provide investment advice to the public.

The move by SEBI comes in the wake of the income tax department’s action against the top 35 social media influencers for allegedly evading taxes worth crores of rupees. Recent searches were conducted on the top 13 YouTubers in Kerala for similar tax violations.

SEBI Chairperson, Madhabi Puri Buch, announced the development of the discussion paper, stating that it would be made available for public comments in the coming months. This decision followed a comprehensive board meeting, during which the board embraced a series of regulatory reforms, including the reduction of share listing time from six days to three days after an initial public offering (IPO).

Furthermore, the board of SEBI has voted in favour of strengthening disclosure requirements for significant foreign portfolio investors. Addressing the regulatory stance, Buch clarified that while SEBI had no objections to individuals educating investors about the market and investments, there was a serious concern when unsolicited investment advice was provided by unregistered entities.

Social media platforms such as Twitter, Instagram, YouTube, and Telegram have witnessed a proliferation of self-proclaimed financial gurus offering stock recommendations and trading strategies without the necessary licenses or expertise. Unregistered finfluencers, often with a substantial fan base reaching up to a million followers, have been accused of manipulating novice traders during the recent surge of interest in the stock market amid the COVID-19 pandemic. By posing as successful traders with substantial portfolios, these finfluencers earn commissions from platforms while also profiting from the market through transactions related to the stocks they promote or demote.

In certain cases, finfluencers generate more income from providing trading courses and workshops than from their trading activities. Last month, SEBI levied a fine of Rs 6.5 crore on PR Sundar, a well-known options trader and YouTuber, and barred him from the market for a year for violating investment adviser guidelines. The inquiry revealed that Sundar operated the website prsundar.blogspot.com, offering various packages for advisory services, with payments collected through a payment gateway linked to the bank account of Mansun Consultancy, of which Sundar is a co-promoter.

SEBI’s proactive measures aim to protect investors from unregulated financial advice and ensure that individuals operating as finfluencers adhere to the necessary regulatory framework. The draft discussion paper is expected to play a crucial role in shaping the guidelines for finfluencers and promoting transparency in the financial influencer space.