SEBI Proposes Performance Validation Agency (PVA) For Finfluencers

As part of its efforts to regulate the activities of ‘finfluencers,’ the Securities and Exchange Board of India (SEBI) is considering the establishment of a Performance Validation Agency (PVA). This proposed third-party entity would be tasked with verifying performance claims made by various market participants, including Portfolio Management Services (PMS), Mutual Funds (MFs), and Investment Advisors. SEBI aims for the PVA to play a pivotal role in validating performance reports, thereby enhancing trust and reliability within India’s financial ecosystem.

Guidelines to Rein in Finfluencers

SEBI Chairperson Madhabi Puri Buch recently announced that the regulatory body is contemplating comprehensive measures to regulate the activities of ‘finfluencers.’ These proposed guidelines seek to overhaul registration norms for finfluencers, simplifying the process to promote ease of registration. Additionally, SEBI intends to ensure greater transparency and accountability in the

financial advice provided by influencers. Buch’s comments, made during an Association of Mutual Funds in India (AMFI) event in Mumbai, underscore SEBI’s commitment to effectively govern finfluencers’ activities.

Crackdown on Unregistered Finfluencers

SEBI’s move to regulate finfluencers comes in the wake of a crackdown on unregistered individuals providing illegal investment advice through social media channels. Last year, SEBI imposed restrictions on intermediaries, prohibiting them from engaging unregistered finfluencers for product promotion. This crackdown reflects SEBI’s proactive stance in safeguarding investors from potentially misleading financial advice.

High-Profile Cases

SEBI’s regulatory actions against unregistered finfluencers have garnered significant attention. Notable cases include the banning of Mohammad Nasiruddin Ansari, popularly known as ‘Baap of Chart,’ and options trader PR Sundar from providing investment advisory services without proper registration. These cases highlight SEBI’s commitment to enforcing compliance and protecting investors from fraudulent financial practices.

ASCI Guidelines

In a parallel effort to regulate influencer advertising, the Advertising Standards Council of India (ASCI) revised its guidelines last year. These guidelines mandate SEBI registration for influencers operating in the banking, financial services, and insurance (BFSI) sector. Influencers must prominently display their registration numbers alongside their qualifications, ensuring transparency in the dissemination of financial advice.

SEBI’s Consultation Papers Regarding Finfluencers

SEBI has also released two consultation papers focusing on payment structures associated with financial advice and education, as well as partnerships between regulated entities and finfluencers. These consultation papers reflect SEBI’s proactive approach to address emerging challenges in the financial advisory landscape, underscoring the regulatory body’s commitment to maintaining the integrity and transparency of India’s financial markets.