The Securities and Exchange Board of India (SEBI) on Thursday (Jan 30) initiated a crackdown on financial influences, also called finfluencers, on giving advice to their followers on the stock market.
In a deathblow to finfluencers, the SEBI has clarified that people who have been providing stock market education will need to do with stock prices with a three-month lag.
It further means that they cannot use live market prices anymore.
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The market regulator has issued a circular, signalling an end to such individuals from using livestock prices while giving advice to their followers.
Earlier in October last year, SEBI had restricted the association of registered and unregistered entities.
However, the latest crackdown will put an end to the final lucrative and questionable business such associations have spawned, which is illegal advisories masquerading as stock market education.
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The finfluencers are likely to quickly lose their subscribers and students.
The circular further stated that investor education is not prohibited. However, it must be ensured by the persons regulated by the Board that such educators should not provide investment advice without SEBI registration or make performance claims without permission from SEBI.
"A person engaged solely in education shall mean that such person is not engaged in any of the two prohibited activities. Such a person should not be using the market price data of the preceding three months to speak/talk/display the name of any security, including using any code name of the security in his/her talk/speech, video, ticker, screen share, etc. indicating the future price, advice, or recommendation related to security or securities," it said.
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According to an Indian media channel, these restrictions are also applicable to advertisements, branding and promotional material through third-party marketing agencies.
Why is SEBI doing this?
Sebi whole-time member Kamlesh Varshney in August told the Indian news website Mint that finfluencers were "…misguiding investors who were losing money. We have been getting a lot of complaints from investors. Then we work with technological platforms where unregistered people give advice.”
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He further said that more than 15,000 content sites have been taken down by them in the last three months after we referred to them.
Many of these finfluencers, sharing such advice, have gained many followers on social media.
(With inputs from agencies)