India's stock market regulator, the Securities and Exchange Board of India (SEBI), on August 25 released a consultation paper proposing a ban on SEBI-regulated entities from working with unregistered financial influencers (finfluencers). "Finfluencers may be effectively enticing their followers to purchase products, services, or securities in return for undisclosed compensation from platforms or producers. This paper seeks to restrict the association of SEBI registered intermediaries/regulated entities with such unregistered finfluencers, to curb the flow of such compensation," the consultation paper states. SEBI-regulated entities include stock brokers, merchant bankers, portfolio managers, investment advisers, share transfer agents, etc. Interested stakeholders can submit their comments to SEBI via email (consultationMIRSD[at]sebi.gov.in) by September 15, 2023. Why does this matter: Finfluencers have mushroomed in the last few years and, in most cases, they are not registered with SEBI to provide services such as investment advice. Some of the finfluencers have been found to be peddling bad financial advice that lacks expertise or even advice that furthers their personal gain to the detriment of their followers. This has led to increased calls for their regulation, including requiring SEBI to make it mandatory for finfluencers to be SEBI-registered Investment Advisers (IAs) or Research Analysts (RAs). While SEBI's proposal doesn't go that far, it restricts who can work with unregistered finfluencers, which will reduce revenue sources for the group and might, in turn, nudge them to become registered IAs or RA. Who are finfluencers: The consultation paper borrows the definition laid out in the Guidelines for Influencer Advertising in…
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