NEWS – SEBI, India’s markets regulator, announced new regulations affecting financial influencers and delisting processes. The measures aim to curb misleading financial advice and simplify delisting procedures

HIGHLIGHTS

Restrictions on Financial Influencers – Brokers and Mutual Funds Directive

• Brokers and mutual funds are prohibited from using unregulated financial influencers for marketing and advertising.
• The decision targets influencers advising on stocks and investments through platforms like YouTube and Instagram.

Rationale Behind the Decision

• Concerns were raised about unregulated entities inducing investors to engage in securities based on inappropriate claims.
• SEBI aims to protect investors from misleading financial advice and ensure market integrity.

Exemptions

• Financial influencers focused solely on investor education are exempt from these new restrictions.

Responsibility of Regulated Entities

• Regulated entities must ensure their associated individuals comply with SEBI’s rules of conduct.
• Promises of assured returns are strictly prohibited.

Growth in Trading Accounts

• SEBI data shows a significant increase in trading accounts, from 36 million in April 2019 to 154 million in April 2023.
• The rise underscores the growing influence of financial advisors in the Indian market.

New Criteria for Derivative-Linked Stocks

Introduction of New Criteria

• SEBI introduced new criteria for selecting stocks eligible for derivative trading, such as futures and options.
• This follows a discussion paper proposing these changes earlier in the month.

Impact on Derivative Trading

• The number of stocks eligible for derivative trading will see a slight increase.

Changes to Delisting Rules

Easier Delisting Processes

• SEBI approved changes to delisting rules, facilitating easier exit from stock exchanges for companies.
• Companies can now offer shareholders fixed prices for shares as an alternative delisting mechanism.

Current Delisting Method

Currently, delisting is done through reverse book-building