ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Regulating ‘Finfluencers’ and Safeguarding Investors

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The finance minister recently remarked on the impact of financial gurus on social media, or “finfluencers,” and the issues they create for investors. Many individuals follow finance influencers—who are not often licensed financial advisers—to learn about the most recent trends and investment opportunities. The comment made by the finance minister shows a rising concern about how these finfluencers affect people’s financial decisions. The new generation of retail investors who seek quick money without spending hours on market research is attracted to the financial information that many freelancers and influencers in the digital age supply, since it is streamlined and simple to understand. Some YouTube influencers have, however, occasionally been caught manipulating stock prices. To stop their participation in the Indian securities market, the Securities and Exchange Board of India (SEBI) issued stern directives. These influencers conspired with profit-seekers and promoters to spread false information and mislead investors. This was done as part of a marketing effort to create fictitious trade activity and produce significant profits for a few stockholders. This instance shows how social media has democratised access to financial services for all users, but it can also be abused to manipulate markets and fool unwary investors.To overcome these problems, the SEBI laws limit the ability to offer financial advice to licensed research analysts and investment advisers. SEBI has established particular rules and regulations for these organisations to safeguard investors and guarantee the calibre and dependability of financial advice on social media platforms. It is against the law to impersonate someone in the financial industry. The SEBI Act, 1993 and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 forbid certain unfair acts. They are referred to as “abusive market practices.”

Any misleading, fraudulent, unfair, or manipulative acts concerning securities or stock offerings are expressly forbidden by Section 12(A) of the SEBI Act, 1993. The goal is to stop financial wrongdoing. A list of behaviours that are regarded as abusive market practices is provided in Regulation 4 of the act. SEBI has increased the scope of its authority to address unfair trade practices by extending it to cover the careless broadcast of information that can affect investing behaviour. Discussing general stock trends on open forums and social media is acceptable, but giving unsolicited advice on small, closed subscription-based channels is prohibited, especially if the firms providing the advice are not registered with SEBI.

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Updated On : 15th Jul, 2023
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