SEBI clears fininfluencers framework; flags concerns on F&O bets on borrowed money

The Securities and Exchange Board of India (SEBI) on Thursday decided to regulate financial influencers or finfluencers amid growing concerns about potential risk associated with such persons.

Madhabi Puri Buch, Chief, SEBI, also went public with her concerns on the macroeconomic implications of retail investors' speculative bets in the futures and options (F&O) segment.

She said people are borrowing money and household savings are drying because of such bets, and announced that the Sebi has formed an expert working group to look into this.

On the fininfluencers, to address the concerns related to certain persons, including unregulated entities inducing investors to deal in securities based on inappropriate claims, SEBI board approved norms to restrict associations between its regulated entities and unregistered individuals.

This came amid growing concern over the potential risks associated with unregulated finfluencers who might offer biased or misleading advice. They usually work on a commission-based model.

The persons regulated by the capital markets watchdog and the agents of such persons will not have any association like any transaction involving money, referral of a client, interaction of information technology systems with any other person who, directly or indirectly, provides advice, recommendation or makes explicit claim of return or performance.

Finfluencers have significantly impacted their followers' financial decisions in the last few years and thus Sebi's regulatory framework can make them accountable and responsible for the advice they provide.

Also, the regulator has decided to create a closed ecosystem for fee collection by Sebi-registered Investment Advisers (IAs) and Research Analysts (RAs) from their clients.

Buch said the T+O settlement has attained its intended objectives of getting the technology proved and establishing India's ability to make such a system work since the launch of the Beta version in 25 stocks.

The regulator will now deliberate on how to move forward on it, she said.

The SEBI board also approved a proposal to remove the imposition of financial disincentives on the Managing Director and Chief Technology Officer of stock exchanges and other market infrastructure Institutions (MIIs) for technical glitches.

The regulator is also tightening its actions on market manipulators courtesy the advanced technological inputs, she said, adding that mischief on SME board will also be acted against.

She declined to speak on the issues regarding Quant MF, saying she doesn't comment on case specific aspects.

The SEBI board also approved proposals on ease of doing business across various aspects, and Buch said the market should expect more such moves going forward.