SEBI's New Guidelines For Investment Advisers And Research Analysts: All You Need To Know
The SEBI has recently issued new guidelines for investment advisers (IAs) and research analysts (RAs) prohibiting the use of technical and legal terms or guaranteed returns in their advertisements
The Securities and Exchange Board of India (SEBI) has recently issued new guidelines for investment advisers (IAs) and research analysts (RAs) prohibiting the use of technical and legal terms or guaranteed returns in their advertisements. This move is seen as a response to the growing number of complaints against misleading information and edited screenshots shared by 'finfluencers' to attract new business leads.
Let’s understand the SEBI's new guidelines and how they impact social media handles that offer "investment advice."
SEBI's New Guidelines
SEBI's new guidelines establish a code of conduct for IAs and RAs that applies to all forms of communication designed to influence investment decisions, including pamphlets, circulars, brochures, research reports, notices, or any other document, information, or material published or used in any electronic, wired, or wireless communication.
Under the new guidelines, all forms of communication issued by or on behalf of IAs or RAs that may influence the investment decisions of any investor or prospective investor are deemed as an advertisement. The advertisement code shall be applicable to all forms of communication, including print media, electronic media, and social media platforms.
The IA/RA must provide accurate information in concise language, including their registered name, address, SEBI registration number, logo/trade name, and CIN. All advertisements must also include a standard warning regarding the market risks of investing in securities, and if the advertisement is not in English, the warning must be accurately translated.
Moreover, specific securities displayed in the advertisement must be accompanied by a disclaimer stating that they are for illustration purposes only. The guidelines also prohibit advertisements from containing anything that is prohibited for publication under the law, false, misleading, biased, or deceptive statements based on assumptions or projections, or any misleading or deceptive testimonials. Additionally, statements that may mislead the investor or are likely to be misunderstood or disguise the significance of any statement contained in the advertisement are also prohibited.
SEBI's Code of Conduct
The SEBI's code of conduct for IAs and RAs aims to ensure that advertisements from investment advisers are truthful, accurate, and not misleading for potential investors. These provisions were first established in 2013 for IAs and 2014 for RAs, and they continue to be applicable to all forms of communication intended to influence investment decisions.
The regulator requires that all advertisements by these professionals be vetted by the capital markets regulator before they are released in the public domain. The SEBI's code of conduct is designed to protect investors' interests, and investment advisers and research analysts must follow these guidelines to ensure that their advertisements are transparent, accurate, and not misleading.
Impact on FinFluencers
Finfluencers, or social media influencers who post about financial information, are likely to be impacted by SEBI's new guidelines. These influencers often use social media platforms to promote investment opportunities and provide investment advice.
Under the new guidelines, finfluencers must ensure that their advertisements comply with SEBI's regulations. This means that finfluencers must avoid using technical or legal terms and must not guarantee returns in their advertisements.
In addition, finfluencers must include a standard warning regarding the market risks of investing in securities and a disclaimer that SEBI registration, BASL membership (for IAs), and NISM certification do not guarantee performance or provide assurance of returns to investors.
The Importance of Verifying Content Creator Credentials for Financial Advice
It is important for viewers to exercise caution and verify the credentials of content creators before relying on their advice. Viewers should consider factors such as the creator's educational qualifications, past work experience, subject matter expertise, and whether they share legitimate sources of information. By taking these factors into account, viewers can determine whether a content creator is sharing information out of genuineness and make informed decisions when it comes to managing their finances.
Identifying Scammy Content: Red Flags to Look Out For
In today's world of Finfluencers, it's important to be aware of the different categories of content being shared - knowledge, opinion, and advice. While knowledge and opinion-based content can be helpful, advice-based content can often be scammy and pose a threat to the public and government. It's important to watch out for red flags such as promotions that sound too good to be true, excessive flattery, dishonesty, and influencers who slide into your DMs to sell something. It's also important to follow reliable personal finance information and understand the goals and risks associated with different investment options. While the government may implement restrictions to control scammy content, personal finance content creators can continue to balance their content between knowledge and opinion while providing proper disclaimers.
To Conclude
The recent guidelines proposed by the Indian Government for financial influencers are a significant step towards ensuring that the interests of the public are safeguarded. Financial influencers possess a considerable influence on the purchasing decisions of their followers, and therefore it is imperative that they provide accurate and impartial information. The guidelines focus on promoting transparency, financial literacy, and avoiding unrealistic promises about financial products. By adhering to these guidelines, financial influencers can establish themselves as credible sources of information and contribute to the financial well-being of their followers. The guidelines will not only benefit the public but also enhance the credibility and reputation of the financial influencer community in India.
The writer, Jay Desai, is a finance content creator and chartered accountant.
[Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP News Network Pvt Ltd.]
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