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SEBI cracks down on Finfluencers with new compliance rules
SEBI has introduced a comprehensive set of regulations targeting the growing impact of finfluencers on India’s investment landscape.
According to MSN, these new rules are a direct response to concerns regarding potential biases and misleading advice from finfluencers, often operating on commission-based models.
Significantly, SEBI has implemented a fixed price mechanism for the delisting of frequently traded shares, alongside a streamlined framework specifically tailored for Investment and Holding Companies (IHCs). Additionally, the regulations introduce notable changes for exchanges and other market infrastructure institutions (MIIs), including the removal of financial penalties for managing directors and chief technology officers following technical failures.
The surge of finfluencers has been remarkable, leveraging their extensive reach among India’s vast retail investor base, particularly through platforms like YouTube, TikTok, and Instagram. Many originate from smaller cities and communicate in Hindi or regional languages, addressing the country’s low financial literacy rate of just 27%. Their influence surged during the Covid-19 pandemic, filling a gap in traditional financial education.
Often surpassing established brokerage firms in popularity, top finfluencers can earn between Rs 15 lakh to Rs 30 lakh per month. However, the sector’s accessibility has also heightened exposure to dubious actors and potentially harmful financial advice.
Under the new SEBI regulations, brokers and mutual funds are prohibited from engaging unregistered financial influencers for promotional activities. However, those involved in investor education remain exempt under strict adherence to SEBI’s conduct guidelines, which include restrictions on guaranteeing returns.
Alongside influencer-related measures, SEBI Chair Madhabi Puri Buch outlined revised criteria linking stocks to derivative products such as futures and options, expanding the number of eligible stocks for derivative trading slightly. Moreover, updated delisting rules enable companies to offer fixed share prices during delisting processes, mandating a minimum 15% premium above the floor price, thereby simplifying exit procedures from stock exchanges.
Source: fintech.global
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