SEBI New Rule: The Securities and Exchange Board of India (SEBI) has implemented a new rule tightening its grip on finfluencers. This rule prohibits any stock market educator from utilizing live stock price data.
What are SEBI's new rules?
This SEBI circular clarifies that stock market educators can now only use stock price data that is at least three months old. This aims to curb finfluencers who manipulate investors using real-time market data. This rule applies not only to live stock prices but also to stock names, ticker symbols, or any material that constitutes an investment recommendation.
What does the SEBI circular state?
The SEBI circular also specifies that individuals providing stock market education are not permitted to offer any form of investment advice. This means that unauthorized individuals providing stock market advice, even under the guise of "education," will not be permitted by SEBI.
Impact on Finfluencers
This new rule will significantly impact finfluencers active on social media platforms who attract followers through live market updates, trading tips, and investment advice. Previously, in October 2024, SEBI issued a circular prohibiting registered financial institutions from associating with unauthorized finfluencers. This new rule further prevents finfluencers from offering unauthorized trading advice, even under the pretext of "education".
Key Highlights of the SEBI Circular
• Unauthorized investment advice is prohibited: Only SEBI-registered professionals can provide stock market advice.
• False promises are restricted: No individual can claim guaranteed profits or assured returns unless permitted by SEBI.
• Companies will also be held accountable: If a financial company associates with finfluencers making false claims, SEBI will hold it accountable.
• Education is permitted, but not disguised advice: Providing stock market education is acceptable, but using it as a pretext to offer investment advice or predictions is strictly prohibited.
• Advertisements must be transparent: SEBI-registered entities cannot engage in advertising partnerships or promotional deals with any finfluencer.
• Secret deals are banned: Secret transactions involving money, referrals, or customer data are also prohibited.
• Provision for strict action: Violation of these rules may result in fines, suspension, or cancellation of SEBI registration.
Why did SEBI take these steps?
Finfluencers are prevalent on social media platforms like YouTube, Instagram, and Telegram. However, many of these finfluencers were selling stock tips and investment advice under the guise of "education," misleading smaller investors.
SEBI found that these finfluencers were selling stock tips to investors through paid memberships, courses, and private groups, causing losses for smaller investors. This strict action aims to curb unregulated investment advisors and maintain market transparency for investors.
Impact on the Finfluencer Industry
Following these new rules, many finfluencers will need to change their strategies. The inability to use live stock data may reduce the popularity of their content. They will either need to obtain SEBI registration or completely alter their strategies.
SEBI's new rules clarify that a clear distinction must exist between stock market education and investment advice. Finfluencers and financial institutions must now maintain transparency in their content and activities. Any individual or entity violating these rules will face strict action from SEBI.
