SEBI bans registered entities from dealing with finfluencers

Market regulator Securities and Exchange Board of India (SEBI) has restricted regulated entities such as brokers and their representatives from associating with unregistered “finfluencers” or persons who directly or indirectly provide advice or stock recommendations without being registered with SEBI.

In order to address the concerns related to certain persons including unregulated entities inducing investors to deal in securities based on inappropriate claims, the SEBI board approved that the persons regulated by SEBI 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 with any other person who provides advice or recommendation or makes any implicit or explicit claim of return or performance related to securities unless permitted by SEBI to provide such advice.

However, the above restriction will not apply to regulated entities for their association with persons who are exclusively engaged in investor education and do not provide advice or claim of return. The restrictions will also not apply to specified digital platforms, which have a mechanism in place to take preventive as well as curative action to ensure that such a platform is not used by any person for providing advice or recommendation with claims of return or performance unless permitted by SEBI.

In September 2023, SEBI floated a consultation paper that seeks to curb the menace of unregistered finfluencers misleading gullible investors in stock markets. This came after Fortune India reported that many finfluencers were selling financial products of various companies to their followers without disclosing whether they were getting any compensation from those companies. The products sold by the finfluencers ranged from subscription to SEBI-registered brokerages to trading software, to market tracking tools.

The SEBI board also approved a proposal to expressly permit Category I and II AIFs to borrow for a period of up to 30 days for the purpose of meeting temporary shortfall in drawdown from investors in order to facilitate ease of doing business and provide operational flexibility to Alternative Investment Funds (AIFs).

In order to facilitate ease of doing business, to protect the interest of investors and to provide flexibility in the Voluntary Delisting framework, the SEBI board approved the introduction of fixed price process as  an alternative to Reverse Book Building process for delisting of companies whose shares are frequently traded. The fixed price offered by an acquirer shall be with at least 15% premium over the floor price as determined under Delisting Regulations.