The Securities and Exchange Board of India (SEBI) continues to take a firm hand against financial influencers or finfluencers as they are called. In the past few months, the market regulator has taken action against several finfluencers and earlier this week, it carried out a major search operation targeting a prominent personality, according to senior SEBI official.
Speaking at a capital markets conclave organised by industry body FICCI, Kamlesh Varshney, whole-time member at SEBI, declined to name the finfluencer, only stating that it was a big name in the industry.
He said the idea behind targeting such high profile cases was to make an impact. “The idea is to create a fear in the market that there is a law enforcement agency, there is a regulator who is watching you. So, people follow the law voluntarily,” said Varshney.
He said the regulator is doing surveillance on all big influencers. He stressed that the if some individuals were only educating people, then there was no problem, rather it would be in line its investor education programme.
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“But, if in the name of education, if you are misguiding, you are giving guaranteed return performance, you are giving calls, buy this stock, sell this stock, you are using live data to trade in the market... That you cannot do without any registration and without following our rules and regulation,” said Varshney.
Earlier this year, SEBI had banned one such finfluencer Asmita Jitesh Patel, also known as ‘options queen’ for unauthorised stock advice. Before that, it had taken action against seven entities, including ‘baap of chart.’
Over the last few years, there has been a huge influx of YouTubers and Instragramers regularly taking to social media with investment advise, many times giving buy, sell calls or sharing live trading strategies. Such things are prohibited under regulations, and only registered investment advisers (RIAs) are permitted to provide advice.
The market regulator has also increased its surveillance on derivatives trading. SEBI had recently taken action against US-based trading firm Jane Street, charging it of unlawful gains.
“On this specific episode, we have constituted a special team inside the surveillance department, along with NSE. We are studying our surveillance, NSE is studying its own surveillance. We are working in coordination with each other,” informed Varshney.
Was the SEBI late in acting against Jane Street? Varshney disagrees.
“It is very easy to say somebody is doing bad violation. But that is not enough for us to act. We have to go to the root of that particular violation and respond to it, because it has to be sustained in a court of law,” he pointed.
Earlier speaking separately at the event, SEBI chairman Tuhin Kanta Pandey said that the regulator planned to raise the tenure and maturity of equity derivatives contracts.
“SEBI’s approach in relation to equity derivatives has been thoughtful and consultative. We have often stated that equity derivatives play a crucial role in capital formation, but we must ensure quality and balance. We will consult with stakeholders on ways to improve in a calibrated manner, the tenure and maturity profile of derivative products,” Pandey told the gathering of top capital market industry executives.
He also said that the regulator wanted to deepen the cash market.
“We are looking to deepen the cash equities market, which is the true foundation of capital formation. Volumes in cash market have grown rapidly, doubling in terms of daily trading volumes over a period of just three years. However, much more needs to be done,” noted Pandey.
He also urged the industry to look at possibilities of creating a regulated platform for trading in pre-IPO companies.
“In a booming IPO market, investors are eagerly anticipating what is next. Yet pre-listing information is often not enough for investors to take an investment decision. Can we think of an initiative, on a pilot basis, for a regulated venue where pre-IPO companies can choose to trade, subject to certain disclosures,” he wondered.
Pandey’s predecessor Madhabi Puri Buch had in January disclosed plans for bringing in a mechanism to allow regulated trading of securities in between the IPO’s stock allotment and its listing.