<ul><li><keyword id="19901201" type="General" weightage="20" keywordseo="SEBI" source="keywords">SEBI</keyword> has brought in new norms to regulate <keyword id="22205854" type="General" weightage="20" keywordseo="financial-influencers" source="keywords">financial influencers</keyword> or “finfluencers”.</li><li>The new norms prevent its regulated entities from partnering with unregistered individuals.</li><li>The new norms are aimed at minimising risks to retail investors who are easily influenced by such entities.</li></ul><keyword id="22979393" type="General" weightage="20" keywordseo="Stock-market-watchdog" source="keywords">Stock market watchdog</keyword> Securities Exchange Board of India (SEBI) has brought in new norms to regulate unregistered financial influencers or “finfluencers” as it looks to clamp down on associations between its regulated entities and unregistered individuals. SEBI, in three separate notifications, has brought in new norms amid growing concerns about the potential risk associated with such <keyword id="21258588" type="General" weightage="20" keywordseo="finfluencers" source="keywords">finfluencers</keyword>. SEBI's board had approved the <keyword id="20306338" type="General" weightage="20" keywordseo="new-regulations" source="keywords">new regulations</keyword> in a proposal last month. <h2>What are the new regulations for finfluencers?</h2>As per the new regulations, SEBI-regulated entities and their agents are restricted from engaging in financial transactions, client referrals or interaction of information technology systems with any other person who, directly or indirectly, provides advice, recommendations or makes explicit claims of return. No person regulated by the Board (SEBI) or the agent of such a person shall have any direct or indirect association with another person who provides advice or any recommendation, directly or indirectly, in respect of or related to a security or securities, unless the person is registered with or otherwise permitted by the Board to provide such advice or recommendation; or makes any claim, of returns or performance expressly or impliedly, in respect of or related to a security or securities, unless the person has been permitted by the Board to make such a claim," SEBI said. SEBI has revised the regulations governing depository participants, intermediaries, and securities contracts. This will prevent mutual fund houses, registered investment advisors (RIA) and stock brokers from partnering with such influencers. SEBI has however allowed an exception for a limiter period for investor education partnerships. In such partnerships, finfluencers will not be allowed to offer recommendations or make claims about returns or financial performance. The new norms have been introduced to protect retail investors who get easily influenced by such entities offering biased or misleading information to earn a commission. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/webstories/baazar-style-retail-ipo-price-band-to-risk-factors-all-you-need-to-know/slidelist/112920678.cms">Baazar Style Retail IPO – Price band to risk factors, all you need to know</a> <a href="https://www.businessinsider.in/business/auto/news/upcoming-cars-launching-in-india-in-september-2024/slidelist/112917920.cms">Upcoming cars launching in India in September 2024</a> <a href="https://www.businessinsider.in/stock-market/news/premier-energies-ipo-allotment-how-to-check-allotment-ipo-gmp-listing-date-and-more/articleshow/112913671.cms">Premier Energies IPO allotment – How to check allotment, IPO GMP, listing date and more</a>

SEBI brings in new norms to regulate finfluencers

Besides undertaking enforcement action against unregistered finfluencers who breach <keyword id="35210" type="General" weightage="20" keywordseo="sebi" source="Orion">SEBI</keyword> regulations, the regulator proposes to disrupt the <keyword id="234340" type="General" weightage="20" keywordseo="revenue-model" source="Orion">revenue model</keyword> for such finfluencers, so that the perverse incentives in the ecosystem reduce. SEBI has come across instances where SEBI registered intermediaries/regulated entities may be relying on such unregistered/unregulated finfluencers to promote their products and services. As per a new paper, no SEBI registered intermediaries/regulated entities or their agents/representatives shall, directly or indirectly, have any association/relationship in any form, whether monetary or non-monetary, for any promotion or advertisement of their services/products, with any unregistered entities (including finfluencers) Entities registered/regulated by SEBI or stock exchanges or <keyword id="6359050" type="General" weightage="20" keywordseo="amfi" source="Orion">AMFI</keyword> shall not share any confidential information of their clients with any unregistered entities. Financial influencers, commonly called 'finfluencers', are persons who provide information and/or advice on various financial topics such as investing in securities, personal finance, banking products, insurance, real estate investment, etc. through social/digital media platforms/channels, and have the ability to influence the financial decisions of their followers. Thus, the activities of finfluencers may deal in areas regulated by financial sector regulators such as SEBI, RBI, PFRDA, and IRDA. Finfluencers often attract investors/prospective investors through their engaging stories, messages, reels and videos on various social media platforms such as Instagram, Facebook, YouTube, LinkedIn, Twitter, etc. However, finfluencers not registered with the relevant financial sector regulator may not have the requisite qualifications or expertise on the subject. Worse, not being formally subject to a financial sector regulator's code of conduct, they may not disclose any potential conflict of interest such as their association with or interest in the products, services or securities that they promote. Many unregistered/unregulated finfluencers directly or indirectly promote products, services or securities. They may induce clients to avail these products or services in return for referral fee for usage of the product, channel, platform, or services that they advertise - such referral fee may be variable (per use or per user), or fixed (retainer model), or a combination of both. The commission may be in an upfront or trail manner, non-cash benefits such as free usage of products or services, compensation received directly from the social media or other platform where they share their content; and profit sharing with the underlying product, channel, platform, or services. Other unregistered entities/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.

SEBI proposes to enforcement action, disrupt revenue model for finfluencers

<ul><li><keyword id="35210" type="General" weightage="20" keywordseo="sebi" source="Orion">Sebi</keyword> has said in a draft circular that the disclosures made in the DRHP and RHP of public issues shall be made available in AV format as well </li><li>Key information in such disclosures includes details about the issuer company, its business operations, financial performance, and other information relevant to the investor </li><li>The effort could be to ensure that <keyword id="6359051" type="General" weightage="20" keywordseo="investors" source="Orion">investors</keyword> are not dependent on investment advice provided on social media by finfluencers </li></ul>In 2023, the Indian IPO market was on a roll with over <a href="https://www.businessinsider.in/stock-market/markets/news/ipo-market-raged-in-2023-with-companies-raising-almost-rs-38000-crore/articleshow/106286435.cms">200 companies </a>across industries participating in initial public offerings (IPOs). And the bumper listing of a (very) few of them means many investors want to have a slice of the IPO pie. The DHRP (<keyword id="13656337" type="General" weightage="20" keywordseo="draft-herring-prospectus" source="Orion">Draft Herring Prospectus</keyword>) is the initial document outlining the IPO. Knowing the details of DHRP is crucial for investors to assess the company's risks and potential rewards before investing in the IPO. In such disclosures, key information typically includes details about the issuer company, its business operations, financial performance, and other material information relevant to investors. Disclosures in DHRP and RHP to to be made in AV format Sebi has said in a draft circular that ‘the disclosures made in the DRHP and Red Herring Prospectus (RHP) of public issues shall be made available in Audio Visual (AV) format for ease in understanding of the salient features of public issues.’ Moreover, the new regulation mandates that such AV should be published in the public domain by the lead manager to the public issue in bilingual versions i.e., English and Hindi. The Hindi version shall contain the text in the Devanagari script. “The purpose behind SEBI's initiative to encourage RHPs and DHRPs to make disclosures available in audio-visual format is to enhance transparency and accessibility for investors. By providing information in a visual format, issuers can effectively communicate key details about their public offerings, thereby enabling greater investor understanding and engagement,” says Mahavir Lunawat, Chairman of the Association of Investment Bankers of India (AIBI). This aligns with SEBI's overarching objective of promoting investor confidence and protection within the capital markets. This move aims to provide investors with standardised, reliable video disclosures, reducing reliance on unauthorised sources. By presenting this information in a standardised audio-visual format, issuers can ensure consistency, transparency and clarity in their communication, facilitating informed decision-making by investors. Investors should stay away from unsolicited advice One of the main reasons behind Sebi’s decision is to protect the interests of investors and limit the possibility of them falling prey to unsolicited advice on the internet. Sebi has asked companies to start the audio-visual presentation with the following disclaimer, “Investors are advised not to rely on any other document, content or information provided on the offer on the internet/online websites/social media platforms/micro-blogging platforms and by the finfluencers since the same is not approved/commissioned/paid by the company or its promoter(s)/directors/KMPs in any manner.” Sebi has been warning investors not to follow investment advice from individuals who may be suggesting investment options, commonly known as finfluencers. In recent months, there have been instances of unregistered finfluencers being banned as well. In October 2023, The market regulator banned finfluencer Mohammad Nasiruddin Ansari, also known as 'Baap of Chart’, along with two others since they were providing or providing investment advice without proper registration. In May 2023, Sebi fined a YouTuber and options trader ₹6.5 crore for allegedly violating investment advisor norms. “SEBI's guidance is aimed at safeguarding investor interests and promoting reliance on verified and official disclosures. By encouraging investors to prioritise information from authenticated sources, SEBI aims to promote trust and confidence in the integrity of the capital markets, ultimately empowering investors to make well-informed decisions based on reliable information,” says Lunawat. Investors should thus make well-informed investment decisions, especially when it comes to investing in IPOs, and not be carried away by any investment advice on social media. It is always better to err on the side of caution when it comes to your hard-earned money.

Sebi proposes audiovisual details for IPO disclosures — why is it important

<ul><li>At the start of 2023, India implemented the T+1 settlement system, improving the effectiveness of share market transactions. </li><li>Among those who initiated their investment journey in the year 2023, 15% of their portfolio comprises <keyword id="44430" type="General" weightage="20" keywordseo="index" source="Orion">Index</keyword> funds. </li><li>When it comes to goal planning, buying a home is the main goal among investors, followed by retirement. </li></ul>In 2023, a strong influx of investments from domestic <keyword id="6357979" type="General" weightage="20" keywordseo="mutual-funds" source="Orion">mutual funds</keyword>, a revival in foreign acquisitions, and a consistent corporate profit scenario propelled India's primary indices to achieve their eighth consecutive year of growth. The <keyword id="66115" type="General" weightage="20" keywordseo="nifty-50" source="Orion">Nifty 50</keyword> and <keyword id="53232" type="General" weightage="20" keywordseo="bse-sensex" source="Orion">BSE Sensex</keyword> witnessed increases of 20% and 18% respectively. India's market capitalisation surpassed the milestone of $4 trillion, securing its position as the world's fourth-largest market, trailing behind the United States, China, and Japan. A report by online wealth management platform Kuvera, talks about some key trends and throws up some interesting insights into investor behaviour in 2023, based on the activity on their platform. We take a look. The <keyword id="6354763" type="General" weightage="20" keywordseo="ipo" source="Orion">IPO</keyword> rush In 2023, Indian companies witnessed a surge in the number of initial public offerings (IPOs), setting a new record. However, the absence of substantial offerings resulted in India Inc.'s total funds raised falling significantly short of its peak. Activity on the main boards remained subdued, with the overall amount raised declining from 2022. On a positive note, the SME exchanges experienced unprecedented success, achieving new highs in both the number of IPOs and the funds raised. Important regulatory changes 2023 also saw a number of important regulatory changes being introduced. As of January 27, 2023, India implemented the T+1 settlement system, improving the effectiveness of share market transactions. Under this system, shares are now credited to demat accounts within one day of purchase, a departure from the previous two-day process, enhancing transaction efficiency. SEBI cracked down on financial influencers, with penalties imposed and considerations for stricter rules on associations between regulated and unregulated entities in what is now known as the "Finfluencer Saga." SEBI also enforced mandatory nominee additions for demat and mutual fund account holders, enhancing security measures. Auto-debit systematic investment plans (SIP) now have a capped period of 30 years, departing from their previous perpetual nature. The indexation benefit available to debt mutual funds was also removed in the 2023 budget. Furthermore, SEBI introduced a quantifiable material threshold for company disclosures, prompting a more thorough evaluation by companies before deciding whether to disclose information. These regulatory changes collectively contribute to increased transparency and accountability in the financial landscape. <keyword id="159805" type="General" weightage="20" keywordseo="sips" source="Orion">SIPs</keyword> drive the market The regular inflow of money through SIPs provides a positive boost to the market, potentially leading to an annual increase of approximately 3%, assuming all other factors remain constant. This means that, on its own, the market could experience an uplift of about 3% each year due to these SIP inflows. According to the report, applying a multiplier similar to recent research in the US market, every new ₹1 invested in the market might contribute to a ₹5 increase in the overall market value. Considering a monthly SIP of $2 billion, translating to an annual SIP of $24 billion, in a market of approximately $4 trillion, this could result in a significant impact, potentially leading to a ~3% annual return. A roof over the head When it comes to goal planning, buying a home and planning for retirement are the top most goals with 24% and 20% investors planning for these two goals respectively. Buying a car (16%) and education (9%) were the other goals of investors on the Kuvera platform. Preference for index funds Investors who recently joined the Kuvera platform are displaying an increasingly strong inclination towards Index funds. Among those who initiated their investment journey in the year 2023, 15% of their portfolio comprises Index funds, marking the highest percentage recorded to date. This trend indicates a growing recognition and preference among newer investors for the stability and diversification offered by Index funds in their investment portfolios. Also, on an average, investors have 8 schemes in their portfolio.

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SEBI brings in new norms to regulate finfluencers

Sourabh Jain

SEBI proposes to enforcement action, disrupt revenue model for finfluencers

IANS

Sebi proposes audiovisual details for IPO disclosures — why is it important

Anagh Pal

Investors chose the SIP route to invest in 2023 with a strong inclination towards index funds

Anagh Pal