Markets regulator the Securities and Exchange Board of India (Sebi) is planning to bring finfluencers under the ambit of the market norms, said Kamlesh Varshney, whole time member, Sebi.
Speaking at the Mint Annual BFSI Summit & Awards, Varshney reiterated that Sebi was not against short selling, however naked short selling cannot be allowed in India. He also added the markets regulator is mindful that sometimes too many changes to rules may create fatigue and Sebi is looking to tweak the rules only in areas where there is immediate risk.
The comments by the Sebi come at a time when regulating unregistered finfluencers has turned into a major issue in the securities market as thousands of gullible investors are falling prey for such unregistered financial advice.
The regulator has already undertaken a crackdown on finfluencers, who were providing illegal investment advice through social media. Sebi has also placed restrictions on intermediaries such as brokers and mutual funds from using the services of such unregistered finfluencers for promotion of their products.
Varshney said, now Sebi was looking to bring these finfluencers under the regulatory net so that their activities can be better monitored.
“The first task should be that most of the people(finfluencers) should be in the regulatory net so that it is easy to monitor them, so that it is easy to see that they are complying with the security laws. If there are a few people who are violating, then it is easy to catch them.” Varshney said.
“You must be seeing that lot of orders that we are passing in case of influencers whenever we noticed something is going wrong. But that is, of course enforcement side but on the regulatory side, our objective going forward is that to make regulatory changes based on the inputs from the industry, so that all these influencers are on board(registered).”
Commenting on industry concerns that Sebi is making too many changes to rules constantly, Varshney said the regulator was adopting a balanced approach.
“Because we all understand in management also that if there are too many changes, fatigues build. But we also have to take into consideration that if there are risk areas building up, then we need to act immediately.” Varshney added.
Varshney also reiterated Sebi’s stance on short selling of securities – an issue that turned controversial following the Adani-Hindenburg saga. Varshney said Sebi was not against short selling but there was no question of allowing naked short selling.
“First of all, I fully agree that there is nothing wrong in short selling. In fact, if you remember, this particular issue came up before the Supreme Court and while this issue was being examined, Sebi also exactly said the same thing that short selling should not be banned,” Varshney said.
However, naked short selling is practice where short positions are taken without providing any security or assurance that the seller would honour his commitment.
“If you have taken a particular position on a security, you cannot honour your commitment, you are exposed at the time of settlement. Obviously, no country will allow that.”
Vashney also spoke at length on various regulatory measures undertaken by Sebi to ensure safe markets for investors. He highlighted the recent Sebi’s July circular mandating all brokers to upstream client funds. He said misutilization of client funds or securities has been a major challenge for the regulator in episodes like Karvy Broking scam. Hence, Sebi ramped up inspection of brokers and their books and whenever any discrepancies are witnessed, Sebi initiates adjudication proceedings.
“Now to get over all that the policy change was implemented by Sebi board and that policy change was upstreaming of client funds on end of the day basis. Now, once a client fund is to be parked on a separate bank account and it has to be upstream to the clearing corporation on end of day basis, then we get rid of (need for) all this inspection work.” Varshney said.
“If there is a separate bank account. there is no intermingling of client funds with a broker’s fund and that particular amount is uploaded to clearing corporation on end of day basis. The abuse utilization risk is completely removed,” he added.
Commenting on the decision of US Securities Exchange Commission(SEC) to allow Bitcoins, Varshney said as of now there is no mandate on Sebi to regulate cryptocurrencies and a final call on the same must be taken by the concerned ministry. However, he added, just because USA has allowed it doesn’t mean it is right for India. Certainly, Indian regulators will take the US SEC’s decision as an input but the final call must be based on the environment in India.
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Published: 11 Jan 2024, 02:19 PM IST
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