Social media influencers peddle personal views or those paying them on financial markets or stocks. Since January 2022, SEBI has been saying it would come out with regulations to tame the so-called financial influencers, it has not yet issued anything but has been acting selectively on such manipulators
The Reserve Bank is not planning to issue any separate norms to regulate social media influencers pedaling their personal views on the financial markets since sector watchdog SEBI is already on it.
Addressing media after the monetary policy announcement on Thursday wherein the central bank has for the second time in a row left the key policy rates unchanged, governor Shaktikanta Das said, ”The RBI is not planning to issue any separate guidelines to regulate financial market influencers since the SEBI is already doing so”.
SEBI has been planning to direct brokers and mutual funds to limit the use of financial influencers to curb the spread of financial advice via social media advertising and marketing campaigns.
Social media influencers peddle personal views or those paying them on financial markets or stocks. Since January 2022, SEBI has been saying it would come out with regulations to tame the so-called financial influencers, it has not yet issued anything but has been acting selectively on such manipulators.
For instance, in January 2022, the regulator found market abuse through stock recommendations using the social media channel Telegram. Again on March 2 this year, SEBI cracked down on Youtubers and barred about 44 entities from the securities market in an interim order passed for manipulating prices and making illicit gains.
Again, as late as May 27 this year, SEBI fined Rs 6.5 crore on influencer PR Sundar and banned him from the market for a year, for alleged violations of investment adviser norms.
Sundar, who is a Youtuber and options trader, has settled the case after paying the fine. This action marks the first instance of action taken against a finfluencer (financial influencer) by the market regulator.
SEBI’s investigation revealed that Sundar was operating the website www.prsundar.blogspot.com, where he offered various packages for providing advisory services. Payments for these services were collected through a payment gateway linked to the bank account of Mansun Consultancy, of which Sundar is a co-promoter.
SEBI noted that the firm recommended purchasing, selling and dealing securities activities without a registered investment advisory business.
The case, dating back to 2022, involved Sundar, his company Mansun Consulting, and Mangayarkarasi Sundar, a co-promoter of the company. They are strictly prohibited from buying, selling or dealing in securities for one year from the date of the settlement order. Sundar did not have a SEBI registration.
As part of the settlement, they agreed to pay Rs 46.80 lakh (Rs 15.60 lakh for each Mansun Consultancy and two of its directors) and disgorge Rs 6 crore, which includes the profits earned from the advisory services amounting to Rs 4.6 crore and the associated 12 percent interest.
Recently, Finance Minister Nirmala Sitharaman also addressed the concerns related to financial influencers and cautioned about the dangers posed by Ponzi apps offering financial solutions. The Advertising Standards Council of India has laid down guidelines for influencers, who can influence purchasing and investing decisions.
In March 2022, the Australia Securities & Investment Commission asked social media influencers to have a licence to give financial advice, with violators facing a jail term and stiff fines.
Abusive market practices are prohibited under the provisions of the SEBI Act of 1993 and the SEBI (prohibition of fraudulent & unfair trade practices relating to securities market) regulations 2003.
Section 12 A of the SEBI Act prohibits any action of commission or omission relating to securities or issues, via any scheme or device amounting to deceptive practices, fraudulent trade practices, unfair trade practices or manipulative trade practices (collectively referred to as abusive market practices).