Brokers and mutual funds should stop using unregulated financial influencers for marketing: SEBI

Financial influencers engaged in investor education will be exempt from the new restrictions.

Brokers and mutual funds should stop using unregulated financial influencers for marketing and advertising campaigns, The Securities and Exchange Board of India (SEBI) has announced.

The decision was taken to address concerns related to "certain persons, including unregulated entities, inducing investors to deal in securities based on inappropriate claims," SEBI said in a press statement issued after a board meeting.

The Sebi regulated entities and their agents are barred from having any association directly or indirectly with any other person who provides advice or recommendation in respect to securities. The regulated entities cannot have any transactions involving money, referral of a client, interaction of information technology systems or any other association with the unregulated ones, it said.

However, these restriction will not apply to persons regulated by the board or its agents for their association with persons who are exclusively engaged in investor education and do not, directly or indirectly, provide advice/ recommendation/ claim of return or performance.

The rules now put an onus on the person regulated by the board to ensure that the person with whom it or its agent is associated does not indulge in these prohibited activities.

The restrictions will also not apply to specified digital platforms that have mechanisms in place to take preventive as well as curative action to ensure it is not used by any person for providing advice or recommendation with claims of return or performance unless permitted by Sebi.