Mumbai, capital markets watchdog Sebi on Thursday decided to regulate financial influencers or finfluencers amid growing concerns over the potential risk associated with such persons.
To address concerns related to certain persons, including unregulated entities, inducing investors to deal in securities based on inappropriate claims, Sebi's board of directors approved rules to restrict associations between its regulated entities and unregistered persons.
This came amid growing concern about the potential risks associated with unregulated influencers who could offer biased or misleading advice. They usually work with a commission-based model.
Persons regulated by Sebi and agents of such persons shall not have any association such as any transaction involving money, customer referral, interaction of information technology systems with any other person who, directly or indirectly, provides recommendation of advice or make explicit claims for return or performance.
Finfluencers have had a significant impact on the financial decisions of their followers in recent years and therefore, Sebi's regulatory framework can hold them responsible for the advice they provide.
Additionally, the regulator has decided to create a closed ecosystem for collection of fees by Sebi-registered investment advisors (IAs) and research analysts (RAs) from their clients.
This ecosystem will help investors ensure that their payments reach only registered AIs and RAs. This would also help investors identify, isolate and avoid unregistered entities, which would not be able to access this closed ecosystem.
“The Board approved the proposal to facilitate an opt-in mechanism for collection of fees by AIs and RAs registered with SEBI, which will create a closed ecosystem that will provide investors with peace of mind that they are interacting with AIs and registered RAs," the statement said.
The mechanism will facilitate investors to avail the services and make fee payments only to registered AIs and RAs, thereby creating trust in the ecosystem.
In view of this, the mechanism will provide recognition to registered AIs and RAs and help investors differentiate them from unregistered entities acting as AIs and RAs.
The mechanism has been kept optional based on public consultations, Sebi said.
To address concerns related to certain persons, including unregulated entities, inducing investors to deal in securities based on inappropriate claims, Sebi's board of directors approved rules to restrict associations between its regulated entities and unregistered persons.
This came amid growing concern about the potential risks associated with unregulated influencers who could offer biased or misleading advice. They usually work with a commission-based model.
Persons regulated by Sebi and agents of such persons shall not have any association such as any transaction involving money, customer referral, interaction of information technology systems with any other person who, directly or indirectly, provides recommendation of advice or make explicit claims for return or performance.
Finfluencers have had a significant impact on the financial decisions of their followers in recent years and therefore, Sebi's regulatory framework can hold them responsible for the advice they provide.
Additionally, the regulator has decided to create a closed ecosystem for collection of fees by Sebi-registered investment advisors (IAs) and research analysts (RAs) from their clients.
This ecosystem will help investors ensure that their payments reach only registered AIs and RAs. This would also help investors identify, isolate and avoid unregistered entities, which would not be able to access this closed ecosystem.
“The Board approved the proposal to facilitate an opt-in mechanism for collection of fees by AIs and RAs registered with SEBI, which will create a closed ecosystem that will provide investors with peace of mind that they are interacting with AIs and registered RAs," the statement said.
The mechanism will facilitate investors to avail the services and make fee payments only to registered AIs and RAs, thereby creating trust in the ecosystem.
In view of this, the mechanism will provide recognition to registered AIs and RAs and help investors differentiate them from unregistered entities acting as AIs and RAs.
The mechanism has been kept optional based on public consultations, Sebi said.
