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In response to the rising number of fraud cases and misleading financial advice given by so-called “influencers” on social media, the Securities and Exchange Board of India (Sebi) has announced its intention to implement measures to curb the promotion of the “crorepati dream” on digital platforms.
Sebi, the regulatory authority overseeing India’s financial markets, aims to restrict individuals who use social media channels to lure unsuspecting investors with promises of extraordinary wealth. These individuals, often unregistered and unregulated, utilize enticing marketing tactics, claiming that individuals can amass fortunes within a short span of time. Sebi views such activities as fraudulent and misleading, with potential severe consequences for investors who fall victim to these schemes.
During a recent board meeting, Sebi Chairperson Madhabi Puri Buch expressed concerns over the pervasive inducement employed by influencers. She remarked, “They say that if you trade, you will earn in lakhs and crores. You will become crorepati in two years. They already say that you can make lakhs every day. This is inducement. Those who are genuine experts know that nothing of that sort happens in the market. There is no guarantee. Even Warren Buffett makes losses.”
Buch emphasized that the core issue lies in the false guarantees and assurances made by influencers, misleading individuals by presenting a guaranteed path to immense wealth. Sebi intends to treat this behavior as fraudulent and misleading, acknowledging the importance of genuine education and investor awareness initiatives.
As part of its upcoming measures, Sebi plans to release a discussion paper within the next couple of months, proposing regulations to govern financial influencers operating on social media platforms. These regulations will likely aim to enhance transparency, protect investors, and restrict the activities of unregistered influencers. Sebi also intends to work closely with regulated entities such as brokers, mutual funds, and exchanges, urging them to refrain from engaging with unregistered influencers.
The move by Sebi to clamp down on fraudulent influencers marks a significant step in safeguarding retail investors from potential financial scams and misleading advice. The exponential growth of social media platforms has provided a breeding ground for individuals seeking to exploit the uninformed and capitalize on the allure of quick riches.
By implementing stricter regulations, Sebi aims to restore trust in the financial ecosystem and ensure that individuals seeking financial guidance can access reliable and accurate information. The regulator encourages genuine experts in the financial industry to continue educating the public and raising awareness among investors.
As the discussion paper unfolds and the regulatory framework takes shape, market participants, investors, and influencers alike will be closely observing the developments, which are expected to have far-reaching implications for the rapidly evolving landscape of financial advice disseminated on social media channels.
Sources By Agencies
