The proposal to limit the relationship of regulated firms with unregistered “finfluencers” was presented in a consultation document by the Securities and Exchange Board of India (Sebi) on August 25.
Financial influencers, sometimes known as “finfluencers,” are individuals who offer guidance on a variety of financial matters, including real estate investing, personal finance, banking products, insurance, and investing in stocks, using social or digital media platforms. They are said to be capable of influencing their followers’ financial choices.
In its consultation paper, the Sebi recommended that registered firms or intermediaries not work with unregistered finfluencers to market or promote their services.
“No SEBI registered intermediaries/regulated entities or their agents/representatives shall, directly or indirectly, have any association/relationship in any form, whether monetary or non-monetary, for any promotion or advertisement of their services/products, with any unregistered entities (including finfluencers),” the paper added.
Additionally, it was stated in the report that the finfluencers who are registered with the Sebi, stock exchanges, or the Association of Mutual Funds in India (AMFI) “shall display their appropriate registration number, contact details, investor grievance redressal helpline, and make appropriate disclosure and disclaimer on any posts”.
It said that the regulated companies should “not pay any trailing commission based on the number of referrals as referral fee” and that such entities should follow the advertising criteria set out by the authorities.
Registered intermediaries should take proactive steps to distance themselves from any unregistered firm exploiting their brand, product, or service, according to Sebi’s other recommendation.
“They shall take necessary action to bring it to the notice of enforcement agency concerned to take appropriate action, including filing case under section 420 of the Indian Penal Code, 1860 for impersonation and fraud, etc. as may be applicable,” they averred.
The public is asked to comment against the ideas until September 15, 2023, according to Sebi.
