Sebi bans finfluencers from using live stock prices, tightens crackdown on illegal advisories

Under the new rules, which the Securities and Exchange Board announced in a circular last night, finfluencers can only use stock prices with a three-month lag.
SEBI
SEBI(File photo)
Updated on
3 min read

MUMBAI: The markets regulator Sebi, which has been after the so-called financial influencers or finfluencers who are tricking the gullible public into investing in stocks they get paid to recommend, for long, has delivered a major blow to them by restricting their use of live-market data/prices in their what they call educational content.

The key prohibitive measures include not allowing them to use real-time stock price data and using the names of the scripts they are talking up/down directly or indirectly by using code names. The regulator has warned of strict penalties including cancellation of their licence for rule violations. This move is expected to end the illegal advisory businesses that many finfluencers operate without Sebi registration.

Sebi first restricted associations between registered and unregistered entities in an October 2024 circular, and the latest circular further tightens the rules.

Under the new rules, which the Securities and Exchange Board announced in a circular last night, finfluencers can only use stock prices with a three-month lag, effectively preventing them from offering real-time trading tips disguised as education. They are also banned from using the name of the stock directly or indirectly through employing a code.

“A person engaged solely in education shall mean that such person is not engaged in any of the two prohibited activities. Such person should not be using the market price data of the preceding three months to speak/talk/display the name of any security including using any code name of the security in his/her talk/speech, video, ticker, screen share etc indicating the future price, advice or recommendation related to security/securities,” says the circular, adding these “regulations have come into force with effect from August 29, 2024.”

The following are the key points in the latest circular: Finfluencers/self-styled stock market educators cannot use live stock prices - they can use only data with a three-month lag; registered market entities cannot associate with finfluencers in any way that involves monetary or non-monetary compensation; investor education is allowed, but educators must not give investment advice or make performance claims without Sebi’s approval; finfluencers cannot use stock names, codes, or price data from the past three months in any form that could imply investment advice; and any entities found violating these rules risk penalties/suspension/cancellation of their Sebi licence.

“It is the responsibility of the persons regulated by Sebi to ensure that any person associated with them or their agent, directly or indirectly, does not engage in any of the above-mentioned two prohibited activities, directly or indirectly,” the circular warned.

The mushrooming of so-called finfluencers on a slew of social media platforms has blurred the lines between real financial education and investment advice on the sly, leaving the gullible public at risk as it has become too complicated to distinguish credible sources from misleading ones. However, with the latest move, which bans access to live data, many of these financial crooks are likely to find it difficult to retain subscribers and students.

Sebi norms will be violated if any entity regulated by Sebi is indirectly associated with an entity engaging in the above-mentioned prohibited activities, the circular said, adding the restrictions will apply to advertisements, branding and promotional materials sourced through third-party marketing agencies as well.

"Persons regulated by the Sebi and their agents have been advised through the  October 22, 2024 circular to terminate their existing contracts, if any, with persons engaged in any of the above-mentioned two prohibited activities, directly or indirectly, within three months from the date of issuance of that circular," Sebi said.

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