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<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

<ul><li>SEBI has revealed a report on the profit and losses suffered by retail traders in the <keyword id="21711508" type="General" weightage="20" keywordseo="equity-derivatives" source="keywords">equity derivatives</keyword> segment.</li><li>As per the report, 93% of investors lost their money in the derivatives segment.</li><li>The report also adds that only 1% of <keyword id="19972907" type="General" weightage="20" keywordseo="retail-investors" source="keywords">retail investors</keyword> managed to make a profit of ₹1 lakh and above annually.</li></ul> A report by the Securities Exchange Board of India (SEBI) on the profit and losses in the equity derivatives segment has revealed how badly retail investors are performing in the futures and options (F&amp;O) market. There has been an increase in participation in the F&amp;O market by retail investors. With the increased volumes, the government and the Reserve Bank of India (RBI) have been taking steps to keep this under check. “With the increased participation of individual investors in equity and equity derivatives markets, the current study was undertaken to analyse profit and loss patterns for individual traders in F&amp;O during the three years FY22 to FY24, and for all the categories,” said SEBI in its report. This is not the first time SEBI has published such a report. In an earlier report, the watchdog revealed that nearly 90% of retail traders lost money in the equity derivatives segment in FY22. <h2>What are futures and options (F&amp;O)?</h2>Futures and Options (F&amp;O) are financial derivatives used in trading and investing, primarily in stock markets, commodities, and other assets. They allow investors to speculate on the future price movements of underlying stocks or hedge risks. <h2>Retailers lost over ₹1.8 lakh crore in three years</h2>As per the report, retail investors lost a staggering ₹1.8 lakh crore in aggregate losses over the last three fiscal years. Out of the 1 crore investors engaged in the F&amp;O market, 93% of investors or 9 out of 10 investors had an average loss of ₹2 lakh each. The retail investors lost ₹61,000 crore in FY24. As per the report, only 7.2% of retail F&amp;O traders managed to make a profit over the last three years. Among these loss-making investors, around 4 lakh investors suffered an average loss of ₹28 lakh each including transaction costs. What’s more shocking is that only 1% of the investors managed to make a profit exceeding ₹1 lakh after deducting the transaction costs, making one wonder what’s the allure of <keyword id="20852321" type="General" weightage="20" keywordseo="FO-trading" source="keywords">F&amp;O trading</keyword>. Not only are retailers not making any money, but they also spend ₹26,000 per person on average on transaction costs. <h2>It’s not the rich that are losing money</h2>The report further states that 76% of the traders who suffered losses have reported an income of under ₹5 lakh. Nearly half of the traders are under 30 years old, meaning at the start of their careers. Further, over 72% of traders come from small towns. <h2>Addiction? Retailers continue despite losses</h2>Whether it is an addiction or the hope of recovering money, over 75% of loss-making retail investors continued to trade in the derivatives segment despite being in a loss for two years. <h2>Social media influencers to be blamed?</h2>Several social media financial influencers or “finfluencers” have been pushing F&amp;O trading as a get-rich-quick scheme. These financial influencers often use fake trading proofs to exaggerate their returns and push retail investors to enter the derivatives market. The people then push their “courses” or services offering recommendations to users. They charge for this service and users often end up spending money on this after being blinded by the fake proofs. <div type="Article" hostid="261" msid="112926834" title="SEBI brings in new norms to regulate finfluencers" mstype="2" mssubtype="0"></div> The number of retail traders in the F&amp;O market has seen a massive increase, with traders increasing from around 50 lakh in FY22 to nearly 1 crore in FY24. SEBI recently<a href="https://www.businessinsider.in/stock-market/news/sebi-brings-in-new-norms-to-regulate-finfluencers/articleshow/112926834.cms"> introduced</a> new norms to regulate unregistered financial influencers in the country. In three separate notifications, the stock market watchdog has brought in new norms amid growing concerns about the potential risk associated with such finfluencers. While these regulations are a start, there is a need for greater control over these “paid groups” that sell recommendations and the usage of fraudulent income proofs. <h2>Big traders bet on algos</h2>Coming to the large proprietary traders and foreign funds, these made a profit of ₹33,000 crore and ₹28,000 crore respectively in FY24. Out of this, 96% of profitable proprietary traders and 97% of foreign funds used trading algorithms. SEE ALSO: <a href="https://www.businessinsider.in/business/telecom/news/jio-and-airtel-lost-subscribers-in-july-after-tariff-hike-bsnl-records-growth/articleshow/113548793.cms">Jio and Airtel lost subscribers in July after tariff hike, BSNL records growth</a> <a href="https://www.businessinsider.in/tech/mobile/news/xiaomi-emerges-as-the-worlds-second-biggest-smartphone-brand-in-august/articleshow/113478178.cms">Xiaomi emerges as the world’s second-biggest smartphone brand in August</a> <a href="https://www.businessinsider.in/business/auto/news/ford-is-returning-to-india-expresses-intent-to-restart-its-tamil-nadu-plant-for-exports/articleshow/113317956.cms">Ford is returning to India, expresses intent to restart its Tamil Nadu plant for exports</a>

SEBI report reveals the ugly truth of F&O trading in India – 93% of retail traders incurred losses

In a big move, market watchdog <keyword id="19901201" type="General" weightage="20" keywordseo="SEBI" source="keywords">SEBI</keyword> has banned <keyword id="19902194" type="General" weightage="100" keywordseo="Anil-Ambani" source="keywords">Anil Ambani</keyword> from participating in the securities markets for 5 years, for diverting funds from <keyword id="20367971" type="General" weightage="20" keywordseo="Reliance-Home-Finance" source="keywords" meta.keywordsubtype="org" meta.entityname="Reliance Home Finance" meta.hostid="261" meta.entityid="Reliance Home Finance">Reliance Home Finance</keyword> (RHF). This means that the debt-ridden Ambani scion will not be able to serve as key managerial personnel, or director in any listed company for the next 5 years. Additionally, he will also have to pay Rs 25 crore as a penalty. Along with Ambani, 24 others, which include former employees of RHF, have also been banned from trading in the securities market for a five year period. RHF itself has been barred from the securities market for 6 months, and has also been penalized Rs 6 lakh. <h2>Not the first time</h2>In its order, SEBI found Ambani guilty of fraud and channeling away RHF funds under the guise of loans by lending them to entities connected to him. This was despite the company's board of directors repeatedly advising to stop such practices. Ambani continued to orchestrate the fraud, thanks to his key position as the chairman of ADA Group, and also because of his shareholding in RHFL's holding company. In July this year, SEBI had barred the infamous fugitive Vijay Mallya from trading in Indian markets for three years, when it was found that Mallya illegally routed funds via foreign banks and companies to spruce up the share value of his own companies and profiting from the same, aka stock rigging. While all his assets in India are frozen, he also cannot serve as the director of any Indian listed company for this duration. But this is not the first time SEBI has debarred people from the markets. Last year, SEBI had barred Mohammad Nasiruddin Ansari, popularly known as <keyword id="22893256" type="General" weightage="20" keywordseo="Baap-of-Charts" source="keywords" meta.keywordsubtype="org" meta.entityname="Baap of Charts" meta.hostid="261" meta.entityid="Baap of Charts">Baap of Charts</keyword>, after he was f0und doling out misleading stock-related advise, while pretending to run educative courses. SEBI also asked Ansari to refund Rs 17.2 crore he had collected under the guise of fees. Another popular fin-fluencer, PR Sundar, was barred from options trading for an entire year, when it was found that he was running full fledged investment advisory services i.e. recommending buying and selling stocks, without obtaining the necessary licenses Bollywood actor <keyword id="20003289" type="General" weightage="20" keywordseo="arshad-warsi" source="keywords">Arshad Warsi</keyword>, along with his wife Maria Goretti, were also banned by SEBI last year after he was found uploading videos that lured investors to buy shares of two specific companies, namely Sadhna Broadcast and Sharpline Broadcast, and thus, profiting about Rs 29.43 lakh and Rs 37.56 lakh, respectively. They were not allowed to trade until they deposited all profits made in this manner in an escrow account. However, the duo, along with Warsi's brother Iqbal Warsi later received relief from SAT (Securities Appellate Tribunal), which set aside SEBI's order.

Anil Ambani, Arshad Warsi- Famous names who SEBI has barred from the markets

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>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 report reveals the ugly truth of F&O trading in India – 93% of retail traders incurred losses

Sourabh Jain

Anil Ambani, Arshad Warsi- Famous names who SEBI has barred from the markets

Ira Alok Puranik

SEBI proposes to enforcement action, disrupt revenue model for finfluencers

IANS

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

Anagh Pal

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