Indian market regulator SEBI announced new regulations to oversee financial influencers, or "finfluencers," addressing growing concerns over the risks they pose to investors. These influencers, often unregulated, may offer biased or misleading financial advice, typically operating on a commission-based model.
To mitigate these risks, Sebi's board approved measures to restrict interactions between its regulated entities and unregistered individuals. Regulated entities and their agents are now prohibited from engaging in financial transactions, client referrals, or information exchanges with anyone providing advice or making performance claims without proper registration.
Finfluencers have increasingly influenced their followers' financial decisions, prompting Sebi to implement a regulatory framework to ensure accountability and responsibility in the advice given. This move aims to protect investors from potentially harmful financial guidance.
Additionally, Sebi introduced a closed ecosystem for fee collection by its registered Investment Advisers (IAs) and Research Analysts (RAs). This system ensures that payments from clients are made only to registered professionals, helping investors avoid unregistered entities. By creating a secure payment mechanism, Sebi aims to build trust within the financial advisory ecosystem.
"The Board approved the proposal to facilitate a mechanism on an optional basis for fee collection by SEBI registered IAs and RAs which shall create a closed ecosystem thereby giving investors comfort that they are interacting with registered IAs and RAs," Sebi stated.
This mechanism not only provides assurance to investors but also helps distinguish registered advisers from unregistered ones. Though the system is optional, it is expected to enhance investor confidence and promote a more transparent and reliable advisory environment. Sebi's initiative underscores its commitment to safeguarding investor interests in an increasingly digital financial landscape.
[With PTI inputs]
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