'Something’s cooking,' says Sebi's Madhabi Puri Buch on finfluencers' norms

The capital market regulator, the Securities and Exchange Board of India (Sebi), may soon implement regulatory norms for finfluencers or unregistered investment advisors.

“Something’s cooking," Madhabi Puri Buch, chairperson of Sebi, replied to one of the queries raised during a press conference after inaugurating the Association of Mutual Funds of India’s new office in Mumbai. However, Buch didn't explain the phrase completely.

Recently, it has been witnessed that stock brokers and finfluencers have started working mutually to promote opening trading accounts. Stockbrokers have stepped-up a commission model with these finfulencers. Generally, these finfluencers have huge reach via their YouTube and Instagram handles. So, every time they promote affiliate links for opening trading accounts, brokers pay them a commission on a certain percentage basis.

On May 25, Sebi issued a settlement order against finfluencer PR Sundar, his company Mansun Consulting, and co-promoter Mangayarkarasi. In the order, Sundar was asked to make a payment of Rs 15.6 lakh each and repay a total of Rs 6.07 crore (including interest @12 per cent p.a) to settle complaints for the investment advisory services they provided without taking any requisite licence or registration. The total fees collected by Mansun was Rs 4.59 crore, and the interest calculated @12 per cent p.a. from June 01, 2020, till February 02, 2023, sums up to Rs 1.48 crore, making it to a total of Rs 6.07 crore.

The High-Powered Advisory Committee, in its meeting held on February 22, 2023, considered the revised settlement terms proposed by the applicants and recommended the case for settlement.

While currently, no norms have been framed by the regulator, Sebi is still working on tightening the norms for unregistered advisors. Moreover, Registered investment advisors (RIAs) have also raised objections over the functionality of finfluencers.

A month ago, Finance Minister Nirmala Sitharaman also warned people to be aware of Ponzi apps providing financial advice. Thus, one should keep an eye on the advice they get from finfluencers as not all of them are certified financial advisors.