Market regulator Sebi would soon take action against at least four companies that were allegedly pushing stock tips via social media without authorisation, Reuters reported quoting documents and two sources with direct knowledge of the matter.
As per the news agency, Sebi’s aim is to signal its growing concern over luring of retail investors into stock market by entities and individuals, who are not authorised to offer financial advice. Before, this Sebi passed four such orders in the last twelve months.
Only advisers registered with Sebi can offer investment advice.
Action against these entities could range from a complete ban from accessing capital markets to penalties and the refunding of gains made from the wrongful acts, a source told Reuters.
The entities that are potentially facing enforcement action are digital investment platforms, which offer financial products and investment advice without appropriate regulatory licences, a Reuters source said.
“Sebi is examining in these cases if there was an act of fraud or a case of unregistered investment advice,” the first of the two sources cited above said. “The regulator wants to act against these financial influencers on case-to-case basis and use existing regulatory provisions.”
“This is a part of series of enforcement actions that the regulator is taking to tackle unsolicited investment advice being peddled on social media,” said the second source cited above.
These influencers could be required to make disclosures and disclaimers on their social media platforms before they offer any public advice, Reuters said.
The disclosures could include their stock market investments and that they have not received payment to promote financial products or stocks, two people told Reuters.
The regulator has asked for help from local stock exchanges and asset management companies to identify online chat groups where investment advice is being offered, the sources said.
Regulatory and exchange officials said many of these channels have between 50,000-100,000 subscribers and there are thousands of such channels.
“Since August last year, exchanges have issued as many as 30 cautionary letters against companies and individuals who are promising assured returns through social media platforms without an exchange and regulatory licence,” said a senior exchange official.
“SEBI is examining in these cases if there was an act of fraud or a case of unregistered investment advice,” the first of the two sources cited above said. “The regulator wants to act against these financial influencers on case-to-case basis and use existing regulatory provisions.”
“This is a part of series of enforcement actions that the regulator is taking to tackle unsolicited investment advice being peddled on social media,” said the second source cited above.
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