Setback for finfluencers as Sebi asks audiovisual details of IPO disclosures

Market regulator Securities and Exchange Board of India has issued a draft circular in which it has asked companies that are coming out with a public issue to include audiovisual (AV) presentation of disclosures made in their offer documents for interested investors.

The recent step will directly affect a lot of influencers, as many of them earn a lot, even lakhs, by making videos on initial public offers and posting them on social media platforms.

Earlier, Sebi had noted concerns about finfluencers promoting some of the IPOs instead of objectively informing the investors of its merits and risks.

In the draft circular dated March 19, the regulator said that the IPO's AV presentation should start with a disclaimer that investors are not to rely on any other content, such as those made by finfluencers, and that the lead manager (s) of the issue be responsible for the content and information made available on the AV.

Sebi said: “Investors are advised not to rely on any other document, content or information provided on the offer on the internet/online websites/social media platforms/micro-blogging platforms and by the finfluencers since the same is not approved/commissioned/paid by the company or its promoter(s)/directors/KMPs in any manner”.

Sebi has proposed that the AV presentation be made in Hindi and English, and should be in compliance with the advertisement code prescribed under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. It said the duration of the presentation be a maximum of 8 minutes.

Sebi said: "The total duration of the AV shall be equitably distributed among the material disclosures made under various sections of the public issue offer document viz. risk factors, capital structure, objects of the offer, business of the issuer, financial information, litigations and material developments, etc."

The draft circular further stated that the content in the AV presentation should be factual, non-repetitive and non-promotional and the AV should be revised with updated information at the stage of Red Herring Prospectus (RHP).

It also said that the lead manager(s) of the public issue be jointly responsible for the content and information made available in the AV.

Financial influencers or finfluencers offer financial guidance and tips on social media to investors. Their significance has grown in recent years, especially during the pandemic, with a surge in retail investor engagement in the markets.

Last year, Sebi had proposed restricting its regulated entities from associating with finfluencers — including a bar on referrals and sponsored content.

Last year, Sebi banned Mohammad Nasiruddin Ansari, a financial influencer, from dealing in the securities market. Sebi ordered Ansari to pay back Rs 17.2 crore which he had allegedly made by luring clients through “misleading/false information” and “influencing” them to deal in securities.

In May 2023, P R Sundar, another financial influencer, settled a case with SEBI, after he agreed to seize from buying/selling securities for a year. The SEBI order in that case also required the payment of a settlement amount, and disgorgement of more than Rs 6 crore. 

Earlier this month, Sebi chairperson Madhabi Puri Buch said the market regulator plans to put in place some ‘building blocks’ to ensure smooth enforcement of regulations for finfluencers.

“There are many interlinked pieces in our regulations — investment advisor regulations, research analyst regulations, the fact that we don’t have algorithmic (algo)-related regulations, what brokers are permitted to do, and what is incidental advice. This is complex and going to become very big. The traditional Sebi approach is not going to work. So, we need to have a different approach to this. The first and critical building block for that is the performance validation agency,” Puri said.