MUMBAI: According to documents examined by Reuters and two persons with direct knowledge of the situation, India’s market regulator will take action against at least four companies accused of pushing stock advice over social media without permission.
The regulator’s actions, which follow four other orders passed in the past 12 months, are intended to express rising concern over the lure of stock market investments made by non-advised-financial-advice-licensed businesses and people.
According to the Securities and Exchange Board of India’s regulations, only advisers who are members of the organisation may provide investment advice.
According to the first source given above, sanctions against these firms might include everything from a complete restriction on access to financial markets to fines and the reimbursement of earnings obtained from the wrongdoing.
Digital investment platforms that provide financial goods and investment advice without the necessary regulatory licences could be subject to enforcement action, according to the sources. These companies’ specifics are unknown. The first of the two reports above stated that “Sebi is investigating in these situations if there was an act of fraud or a case of unregistered investment advice.” “The regulator aims to use current regulatory rules and take action against these financial influencers on a case-by-case basis.”
The second of the aforementioned sources stated, “This is a part of a series of enforcement actions that the regulator is conducting to counter unsolicited investment advice being marketed on social media.
As with other markets, India saw a spike in the number of retail investors buying shares during the epidemic, as well as an increase in the number of unregistered advisers focusing on these investors.
According to a Sebi research published on January 25 of this year, individual investors lost nine out of ten of the 500% gains they made in India’s futures and options markets between the financial years 2018–19 and 2021–22.
On how to more widely control social media financial influencers, the regulator will contact the market players.
Before they give any public advice, these influencers might be forced to post disclosures and disclaimers on their social media channels. According to the two people described above, the disclosures may include their stock market holdings and the fact that they did not receive paid to advocate financial products or stocks.
The regulator has called for help from local stock exchanges and asset management organisations to identify internet chat groups where investing advice is being offered, the sources added.
There are thousands of these channels, many of which have between 50,000 and 100,000 members, according to regulatory and exchange officials.
According to a senior exchange official, “exchanges have issued as many as 30 cautionary letters against organisations and people since August last year who are guaranteeing assured returns through social media platforms without an exchange and regulatory licence.”