The SEBI has announced a comprehensive set of new regulations aimed at the burgeoning influence of finfluencers on India’s investment landscape.
According to MSN, these new rules are a direct response to concerns over the potential biases and misleading advice propagated by finfluencers, who often operate on a commission-based model.
Notably, Sebi has established a fixed price mechanism for the delisting of frequently traded shares alongside a streamlined delisting framework specifically designed for Investment and Holding Companies (IHCs). Furthermore, the new regulations include significant changes for exchanges and other market infrastructure institutions (MIIs), such as the elimination of financial penalties for their managing directors and chief technology officers in the wake of technical failures.
The rise of finfluencers has been dramatic, driven by their wide reach among India’s massive retail investor base, particularly through platforms like YouTube, TikTok, and Instagram. Often hailing from smaller cities and communicating in Hindi or regional dialects, these influencers have capitalized on the low financial literacy in the country, which stands at just 27%. Their influence expanded rapidly during the Covid-19 pandemic, filling a void left by traditional financial education.
With their popularity often surpassing that of well-established broking firms, top finfluencers can earn between Rs 15 lakh to Rs 30 lakh per month. However, the sector’s low entry barriers have also heightened the risks of exposure to dubious actors and potentially harmful financial advice.
Under the new Sebi regulations, entities like brokers and mutual funds are now barred from employing unregistered financial influencers for marketing purposes. However, those involved in investor education will remain exempt, provided they adhere strictly to Sebi’s conduct guidelines, which include prohibitions on guaranteeing returns.
In addition to the influencer-related rules, Sebi chair Madhabi Puri Buch outlined new criteria for linking stocks to derivative products such as futures and options, which will slightly increase the number of stocks eligible for derivative trading. Also, the updated delisting rules now allow companies to offer fixed share prices to their shareholders, with a mandatory minimum of 15% above the floor price, streamlining the exit process from stock exchanges.
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