SEBI Cracks Down on Unregistered Finfluencers to Protect Investors

To combat unregistered financial influencers, or "finfluencers," who take advantage of social media platforms to offer false stock market and investment advice, the Securities and Exchange Board of India (SEBI) has stepped up its efforts. Sources claim that in order to stop these operations, SEBI is currently in talks with significant platforms like Google and Telegram.

SEBI’s Multi-Layered Approach to Investor Protection

SEBI has adopted a multipronged strategy to reduce risks arising from the advice provided by unregistered finfluencers. Collaborating with social media platforms is a core part of this plan. The regulator confirmed to Moneycontrol that discussions are ongoing with other platforms as well to ensure better monitoring and action against violators.

Regulatory officials noted that most platforms have shown a positive response and are likely to introduce mechanisms to deter misuse. Platforms that fail to align with SEBI's objective may lose opportunities to do business with SEBI-regulated entities.

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Many fraudulent activities have surfaced in recent months, where platforms like YouTube, Telegram, and WhatsApp were used to create false hype around unknown companies, misleading investors. SEBI has also seen several instances where Telegram and WhatsApp groups were used to lure investors into buying dubious stocks.

Strict Ban on Association with Unregistered Finfluencers

SEBI regulations strictly prohibit all SEBI-regulated entities from forming any monetary or promotional relationships with unregistered influencers. This includes direct and indirect associations such as digital collaborations, marketing arrangements, or referral fee agreements. The objective is to cut off all financial incentives for unregistered individuals promoting investment products or services.

However, SEBI has clarified that such restrictions do not apply to associations made through "specified digital platforms." These platforms must have robust mechanisms to ensure that investment tips or advice are not shared by unregistered individuals or those making false performance claims.

SEBI Probing Multiple Cases of Stock Market Manipulation

SEBI is also actively investigating several cases of stock manipulation and false tips being spread through social media channels such as Telegram and YouTube. Sources indicate that regulatory directions in at least four to five such cases are expected within the next two to three months.

Meta’s Action Against Fake Investment Ads

In a parallel development, Meta (the parent company of Facebook, Instagram, and WhatsApp) has mandated that all advertisers running investment-related ads targeting Indian audiences must verify themselves with SEBI starting July 31. This aims to curb fake financial advice and protect investors.

Conclusion

SEBI’s efforts, in collaboration with social media giants, represent a significant step towards investor protection in the digital age. While regulatory action intensifies, investors are also advised to exercise caution, avoid unverified tips, and always check the credentials of those providing financial advice.