SEBI tightens rules to regulate unregistered finfluencers

The Securities and Exchange Board of India (SEBI) has banned regulated entities from associating with influencers who are not registered with SEBI. This has been done with the aim of regulating unregistered financial influencers, who pose a risk due to the unregulated guidance that they may give to investors.

In a press release issued, following the 206th meeting of the SEBI Board, it was approved that association of persons regulated by the SEBI with persons who directly or indirectly provide advice or recommendations without being registered with SEBI or make any implicit or explicit claim of return or performance in respect of or related to a security or securities.

In order to address the concerns related to certain persons including unregulated entities inducing investors to deal in securities based on inappropriate claims, the Board approved the following proposal on association of persons regulated by the SEBI and the agents of such persons with other specified persons.

The persons regulated by the Board and the agents of such persons shall not have any association, like, any transaction involving money or money’s worth, referral of a client, interaction of information technology systems or any other association of similar nature or character, directly or indirectly, with any other person who, directly or indirectly, provides advice or recommendation or makes any implicit or explicit claim of return or performance, in respect of or related to security or securities unless permitted by the Board to provide such advice/ recommendation/ claim.

However, the above restriction shall not apply to persons regulated by the Board or their agents for their association with persons who are exclusively engaged in investor education and do not, directly or indirectly, provide advice/ recommendation/ claim of return or performance.

Through specified digital platform, which has a mechanism in place to take preventive as well as curative action, to the satisfaction of the Board, to ensure that such a platform is not used by any person for providing advice / recommendation /claim of return or performance, unless permitted by the Board to provide such advice/ recommendation/claim.

It shall be the responsibility of the person regulated by the Board to ensure that the person with whom it or its agent is associated does not indulge in such prohibited activities.