The Securities and Exchange Board of India (SEBI) on Friday (August 25) introduced a comprehensive set of regulatory reforms with the aim of fortifying investor protection and enhancing the overall integrity of the financial ecosystem.

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These measures are directed towards curtailing the engagement of SEBI-registered intermediaries and regulated entities with unregistered entities, including influencers, to mitigate the potential risks associated with misinformation and questionable practices within the financial sector.

The move comes in response to growing concerns over the potential dissemination of misleading information and dubious practices within the financial landscape, propagated by certain unregistered entities referred to as "finfluencers."

Under the newly introduced regulations, SEBI-registered intermediaries and regulated entities are explicitly prohibited from establishing any form of association, be it direct or indirect, with unregistered entities (including finfluencers) for promotional, advertising, or collaboration purposes.

This directive extends to the promotion of services and products, ensuring that the dissemination of financial information maintains the highest standards of accuracy and credibility.

Additionally, entities under SEBI, stock exchanges, or the Association of Mutual Funds in India (AMFI) purview are mandated to refrain from sharing confidential client information with unregistered entities, fortifying investor data privacy.

Individuals who have achieved the distinction of "finfluencers" under SEBI, stock exchanges, or AMFI aegis are bound by stringent disclosure norms. They are required to prominently display their registration credentials, contact particulars, and investor grievance redressal helpline information, along with requisite disclosures and disclaimers, providing clarity and transparency to their audience.

They are required to fully adhere to the code of conduct under the terms of their relevant registration.

In the realm of advertising and promotions, SEBI-registered intermediaries and regulated entities are enjoined to adhere to advertising guidelines issued by SEBI, stock exchanges, and recognised supervisory bodies.

Notably, the SEBI-registered intermediaries and regulated entities are prohibited from offering any trailing commission based on the number of referrals as a form of referral fee.

However, a controlled provision for limited referrals from retail clientele exists, accompanied by fee structures that align with industry norms. "Limited referrals from retail clients, and payment of fees for such limited referrals by stockbrokers shall be allowed," it said in a statement.

Additionally, SEBI-registered intermediaries are required to proactively distance themselves from any unregistered entity attempting to exploit their branding, products, or services for nefarious purposes.

They are obligated to promptly alert the relevant enforcement agency to initiate appropriate actions, which may encompass the filing of cases under Section 420 of the Indian Penal Code, 1860, pertaining to offenses such as impersonation and fraud, based on the prevailing circumstances.