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SEBI Flags 8,890 Misleading Posts, Mulls Action Against Social Media Influencers
The Securities and Exchange Board of India (SEBI) has flagged 8,890 instances of unlawful or misleading content on social media and has informed major platforms to initiate legal action against those spreading such content related to the securities market. This was disclosed to the Rajya Sabha on July 30.
Vasudha Goenka, partner at Cyril Amarchand Mangaldas, emphasized the importance of regulating advice on social media due to its vast audience. She noted that anyone can offer advice on these platforms, leaving investors uncertain about the credibility of the information. Given SEBI’s mandate to protect investor interests, stringent measures are anticipated to ensure access to accurate and reliable financial information.
SEBI has been actively intervening in the capital markets to curb misinformation, including illegal stock advice and misleading financial content by financial influencers, or “finfluencers.” Rajiv Sharma, Partner at Singhania & Co., explained that influencers are popular among small retail investors for advice on investments, financial products, and personal finance. SEBI’s consultation paper, released on August 25, 2023, addresses the association of SEBI-registered intermediaries with unregistered entities, including influencers. Sharma highlighted SEBI’s recognition of the educational value provided by authentic influencers while also noting efforts to curb misinformation from unregistered ones.
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Ashutosh Srivastava, Counsel at SKV Law Offices, remarked on the rising popularity of influencers and their potential to increase financial literacy. However, he warned about the questionable accuracy and reliability of their advice. He cited cases like Sharpline Broadcast Limited, where YouTube creators were found disseminating misleading information, leading to market manipulation. SEBI has responded by restricting these individuals from dealing in securities.
SEBI Chairperson Madhabi Puri Buch announced on July 31 that new regulations targeting influencers would soon be introduced. These regulations aim to prevent unqualified and unregistered influencers from providing financial advice and marketing financial products. Rajiv Sharma added that these rules would protect small retail investors and ensure that SEBI-registered entities adhere to a regulatory code of conduct when engaging with influencers.
Suriti Chowdhary, co-founder and partner at Saaz Partners, stressed the importance of regulating rather than prohibiting influencers to protect investors from misinformation, especially in a country like India with low financial literacy rates. Alay Razvi, Partner at Accord Juris, underscored the need to protect consumers, provide market stability, and prevent fraud. Advocate Ravi Prakash, Associate Partner at Corporate Professionals, highlighted the risks of unregulated advice, including market manipulation and unethical practices. He emphasized that SEBI’s regulations would enhance financial literacy and ensure that only qualified, registered individuals provide investment advice.
Amit Mishra, founder of Svarniti Law Offices, explained that SEBI’s decision to implement stricter norms for influencers is driven by the need for due diligence, investor protection, risk disclosure, and compliance monitoring in financial advice. With the growing discussion of cryptocurrencies and their associated risks, thorough due diligence by influencers is critical before making investment recommendations.