Mutual Fund News : SEBI to Issue Guidelines for 'Finfluencers' on Social Media

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The Securities and Exchange Board of India (SEBI) is formulating guidelines for financial influencers or finfluencers to curb the unsolicited stock recommendations and financial advice on social media platforms without availing the market regulator’s registration.

Recently, the Securities and Exchange Board of India’s whole-time member Mr Santosh Kumar Mohanty said, “The market regulator is working on guidelines for those providing financial advice on social media platforms. “ 

This move from SEBI comes after the increasing number of social media finfluencers on multiple platforms that provide investment advice to their followers/subscribers without any license. Given that, there have also been allegations that influencers are being roped in to manipulate the share prices of certain companies.

Due to lack of proper framework and regulations, finfluencers continue advising claiming it to be under the sphere of financial literacy. Finfluencers are of the opinion that as they do not charge any fee from people on social media, they do not enter into any contract with the viewers.

The Advertising Standard Council of India (ASCI) and SEBI have previously informed advisories with instructions addressing misconduct by unregistered financial advisors. However, there is currently no legislative framework or set of rules to govern the growing base of financial influencers on social media.

As a result, this creates the need for SEBI to establish a mechanism to restrict such uninformed advice which may have an effect on investors' wealth. Post the guidelines are rolled out, finfluencers will be liable for action for giving financial advice without being registered with SEBI even if there is a lack of a contract with the consumer and even if the influencer gives a disclaimer about not being registered with the market regulator. 

[Read: Should You Invest in Best Mutual Funds Recommended by Social Media Influencers?]