SEBI Plans To Regulate Social Media Influencers Offering Financial Advice

The securities market regulator is preparing guidelines to regulate social media influencers offering financial advice.

Several social media influencers on YouTube, Twitter, Telegram and other platforms are disseminating financial advice without any requisite qualification to do so, said SK Mohanty, whole-time member, SEBI. This has resulted in instances detrimental to the market, Mohanty said, while speaking at a corporate governance conference organised by the Confederation of Indian Industry.

According to Securities and Exchange Board of India regulations, only persons licensed as investment advisers are permitted to disseminate financial advice.

However, the fact that investment advice rendered without consideration is outside the purview of the regulations allows "financial influencers" to provide advice through social media platforms.

Mohanty also spoke about various financial frauds that have caught the eye of the regulator, especially siphoning funds where public money raised through markets are lent to related party companies with prior knowledge that it wouldn't be recoverable.

Insolvency is being used as a "washing machine" for companies to wash their dirty linen, he said. He was referring to the tendency of companies to write-off advances made to related companies once the latter goes through insolvency.

No objections are made at that point; they are undertaking predetermined credit risk, he said.