When You Become Advisor, Not Educator According to Sebi: 10 Points (Meta AI Generated Image)

Financial influencers, also known as finfluencers, are facing stricter regulations as the Securities and Exchange Board of India (Sebi) clarifies that naming specific stocks on social media platforms will classify them as advisors rather than educators. This move aims to ensure market integrity by preventing regulated entities from associating with individuals providing advice or recommendations.

Here are the key points:

1. Sebi chairperson Madhabi Puri Buch stated, according to a Mint report that mentioning the name of a security transforms an educator into an advisor, making them subject to regulations.
2. On June 27, Sebi barred regulated entities such as stock brokers from associating with individuals who provide advice or make performance claims about securities.
3. Sebi differentiates between those who provide investor education without recommending or making performance claims and those who do, the latter being classified as advisors.
4. During an event, Sebi’s clarification aimed to ensure that regulated entities are not involved with individuals engaged in prohibited advisory activities.
5. Sebi’s regulations exclude digital platforms that can take preventive and corrective actions, ensuring they do not fall under the new restrictions.
6. According to Chirag Shah, a senior securities lawyer, using company names for educational purposes should not lead to losing immunity, but making buy/sell recommendations would.
7. In a recent meeting, Sebi approved norms to combat misinformation spread by finfluencers by restricting their association with regulated entities.
8. Sebi mandates that regulated entities and their agents cannot have financial or informational interactions with unregistered advisors.
9. The regulator allows for investor education associations, provided no recommendations or performance claims are made.
10. Sebi introduced flexibility in the voluntary delisting framework and provided certain funds exemptions from detailed disclosures under the Foreign Portfolio Investor (FPIs) regulations.