Recent Consultation Paper issued by SEBI
Action taken by SEBI:
- The influencer was prohibited from trading in the securities market by SEBI.
- In addition, court had mandated that the influencer repay the Rs 17.2 crore that he had purportedly earned by seducing customers with “misleading/false information” and “influencing” them to trade stocks.
Concerns about finfluencers:
- Some of these finfluencers make outrageous statements in an attempt to attract attention, entice users to subscribe to their services, and make money.
- To force equities down the throats of credulous investors, they have turned to immoral tactics.
The beneficial role of influencers:
- Influencers have the potential to help those who are unfamiliar with financial markets, goods, and services by sharing financial knowledge and guidance with them.
What Are The Functions And Powers Of SEBI?
- Being a quasi-judicial and quasi-legislative organisation, SEBI has the authority to make rules, carry out investigations, issue verdicts, and apply sanctions.
It serves to satisfy the following three categories’ requirements:
- Issuers: By offering a market place where issuers can raise more capital.
- Investors: By guaranteeing information that is precise and reliable and by providing safety.
What are the problems and associated worries?
- SEBI, the capital markets regulator, is facing a critical decision as a result of the complexity of its function in recent years.
- Prudent regulation is given less attention than excessive focus to market conduct regulation.
- Because SEBI has significantly more ability to cause significant economic harm than its equivalents in the US and the UK, it has stronger statutory enforcement capabilities.
- It is done on the basis of suspicion and places the onus of proving the suspicion on individuals impacted, so impeding economic activity to a considerable degree. This is akin to preventive detention.
- Due to the broad discretion granted by the SEBI Act to create subordinate legislation, its legislative powers are almost total.
- Substantial gaps exist in the earlier market consultation component and the system of regulation review to determine if regulations have achieved their stated goals. Consequently, there is a generalised fear of the regulator.
- Particularly when it comes to areas like insider trading, regulation—that is, laws and their enforcement—is far from ideal.
- Rather than producing high-quality substantive disclosures, the Securities Offering Documents have been significantly reduced to formal compliance and are incredibly bulky.
Way ahead:
- A shift in mindset is required; in fact, hundreds of submissions describing the market’s abundance of unscrupulous people calling for a harsh crackdown have been received.
- Organisational issues and human resources require SEBI’s specific attention. To attract the top personnel, SEBI has to promote lateral entry.
- There is still work to be done on senior personnel alignment and fitting following the Forward Markets Commission’s merger with Sebi.
- It is logical in this situation to eliminate boundaries that are excluded and areas of overlap by creating a single financial regulator.
In summary:
- In the upcoming years, as the economy expands and more people invest in the stock market, it will be crucial to maintain the flow of reliable financial information, educate investors, and safeguard their interests.
