Stock advisers providing tips on social media to come under Sebi's ambit

The Securities and Exchange Board of India (Sebi) on Thursday said that it is working on coming up with guidelines for financial influencers usually referred as ‘finfluencers’ giving financial advice to investors on various social media platforms.

“We are working on the guidelines for financial influencers”, SK Mohanty, whole-time member Sebi said on the sidelines of a CII National Conference on “Corporate Frauds: Governance on held in Mumbai on Thursday.

This comes after Sebi witnessed an exponential rise in the number of various ‘unregistered’ investment advisors giving unsolicited social media ‘stock’ tips on various platforms including telegram, Facebook, YouTube, WhatsApp, Instagram.

To add to it, there have been many instances where influencers who have considerable following on Instagram, Twitter, Facebook are approached by companies to send out social media posts recommending and endorsing their shares.

In fact, Madhabi Puri Buch, Chairperson, Sebi while addressing a Sebi board meeting for media on 30 September had specifically said that the regulator will have to use a ‘segmented’ approach towards handling the menace of unsolicited social media stock tips. “I think its early days yet given the complex nature of this issue. We are in active discussions with the industry and various stakeholders and it will take us sometime. We do not have visibility on easy solution yet”, Buch clarified.

On 10 March, the regulator had cracked down on market operators across the country for allegedly manipulating stocks through social media.As a part of which the market watchdog had carried out search and seizure operations at the premises of seven individuals and one entity at multiple Ahmedabad and Bhavnagar in Gujarat, Neemuch in Madhya Pradesh, New Delhi and Mumbai.

“Sebi has been receiving information that messages containing stock tips and other investment advice with respect to selected listed companies are being widely circulated through websites and social media platforms”, Sebi had said in its order.

Prior to that, in January, the regulator had come up with an order wherein six individuals were involved in giving unsolicited stock recommendations using social media channels—Telegram, to manipulate stock prices and make illegal profits.

These individuals along with few entities were barred from dealing, selling and accessing the capital markets while the regulator also imposed a ₹2.84 crore penalty on them.

Based on the order Sebi, said the individuals were first taking a position (purchasing shares) in small-cap companies in bulk quantities and then sending baseless and fraudulent messages indicating strong possibilities of immediate price hikes in such scrips through social media channels, encouraging others to buy those stocks.