The Securities and Exchange Board of India (Sebi) recently carried out a search operation on a big finfluencer in Mumbai, revealed Kamlesh Varshney, whole-time member (WTM) of Sebi on Thursday. He said the person against whom the action was taken is a big name in that industry.
“It’s a big name in that industry. And I must give credit to my team because we have been working on this case,” Varshney said, while refusing to reveal the name, at the capital markets conference organised by FICCI in Mumbai.
“The idea is to create fear in the market that there is law enforcement, there is a regulator who is watching you, so that people follow the law voluntarily,” he further said, adding “the purpose is to create deterrence.”
Why was the action taken? Varshney explains
The Sebi WTM said many financial influencers provide legitimate education to investors, but there are some who engage in mis-selling or offer unauthorised tips. Varshney said these people use random trading data to make it look as if they are actually helping people, especially using live trading data. Sebi earlier made it clear that people or entities associated or registered with the regulator must not be involved in any activity of advice or suggestion through these financial influencers.
“If you are misguiding the youth in the name of education, promising guaranteed returns, giving calls in the classroom, using live data to trade in the equity market…you cannot do that without Sebi registration,” he said, quoted Live Mint.
For sometime now, Sebi has been alerting people against these financial influencers and even warned them of action if they continued their work without getting registered with the body. It has also previously issued restrictions for such individuals.
Sebi gets tough on financial influencers
The current search operation is a part of the regulator’s series of checks against unregistered advisors and finfluencers, who have been found to be violating securities laws. To be a financial advisor, especially in market and trading, one needs to be registered with Sebi and take its permission to do so.
Varshney stressed the action is in line with Sebi’s commitment to crack down on major players in the ecosystem. “Quality is more important than number,” he added.
SEBI previously also issued caution to the public against dealing with unregistered entities through a press release dated February 13, 2024.
“These finfluencers are usually persons who are neither registered with the SEBI or other financial sector regulators nor permitted under any regulation issued by the SEBI to provide such advice or recommendation in respect of or related to a security or securities under the purview of SEBI,” it said.
“While some of these finfluencers may be genuine educators, many of them are effectively enticing their followers/investors/prospective investors to purchase financial products, services, or securities in return for undisclosed compensation from producers or platforms,” the regulator added.