SEBI tightens norms on financial influencers

Source- This post on “SEBI tightens norms on financial influencers” is based on the article “SEBI tightens norms on financial influencers, eases rules for delisting” published in “The Hindu” on 28th June 2024.

Why in News?

SEBI which is India’s markets regulator has asked the brokers and mutual funds to stop using the services of unregulated financial influencers for marketing and advertising campaigns.

The Issue

The Indian stock market is booming. This is increasing the popularity of so-called financial influencers who advise on stocks and other related investments through their channels on YouTube and Instagram. These influencers have a large number of followers.

The Guidelines for Financial Influencers

India has 154 million trading accounts, which is a near 4 times jump from 36 million trading accounts in April 2019.

According to the guidelines, it will be the responsibility of the regulated entity to ensure individuals with whom it is associated do not breach the rules of conduct set by SEBI. These guidelines stipulate avoiding the promise of assured returns.

Note- Financial influencers engaged in investor education will be exempted from the new restrictions.

Other Guidelines

1. A new criteria has been introduced to decide on stocks that can be linked to derivative products, such as futures and options. With the adoption of these guidelines, the total number of stocks eligible for derivative trading will rise marginally.

2. New guidelines have been approved which make changes to delisting rules. This would make it easier for companies to exit from stock exchanges. Currently, delisting is carried out via reverse book-building. Companies can now offer shareholders fixed prices for shares as an alternative mechanism to delist from stock exchanges.

UPSC Syllabus- Indian Economy