SEBI circular on investment advice regulations, protecting investors from unregistered financial advice.

SEBI Cracks Down on Brokerages and Unregistered Advice – A Strong Move for Protection 2025

The Securities and Exchange Board of India (SEBI) has taken a firm step towards strengthening financial regulations. In a new circular issued on January 29, 2025, SEBI clarified that brokerages and other regulated entities (REs) can no longer engage with individuals or organizations involved in providing unregistered investment advice, even indirectly. This move aims to close previous loopholes and build on the regulatory framework introduced in August 2024.

What SEBI’s Latest Circular Means

SEBI’s latest circular addresses a key concern around brokerages and regulated entities forming associations with individuals or groups involved in two major restricted activities:

  1. Providing investment advice without SEBI registration.
  2. Making unapproved claims about investment returns or performance.

Though the regulatory guidelines were established in August 2024, there was confusion regarding what exactly constitutes an “association” and whether actions like client referrals or using digital platforms for promotions could be permitted. SEBI’s January 29, 2025 circular offers more clarity and ensures a more robust control over these practices.

Understanding the Concept of “Association”

One of the major clarifications in the circular is the definition of “association.” SEBI now considers the following forms of association as violations:

  • Any monetary transactions or exchanges of value.
  • Referring clients or customers, even without direct compensation.
  • Interactions via information technology systems (including social media and digital platforms).
  • Other similar types of association.

This means that brokerages can no longer share client data with influencers or individuals promoting unregistered investment advice, even if there is no direct financial exchange. The regulation is clear: if the person is engaged in illegal activities like providing unregistered advice, brokerages cannot have any form of connection with them.

Can Finfluencers Still Be Used for Marketing?

The answer is no. Even if influencers are promoting non-SEBI regulated products, such as insurance, brokerages and SEBI-regulated entities are not allowed to work with them if they’re also involved in the two restricted activities. This applies regardless of whether the influencer promotes SEBI-regulated products directly.

For example, a financial influencer promoting insurance products cannot partner with a SEBI-regulated entity if they are also giving unregistered investment advice—whether it’s related to stocks, mutual funds, or any other regulated asset.

What About Marketing Through Digital Platforms?

Many brokerages previously tried to circumvent regulations by using digital platforms to mediate their associations with influencers providing unregistered advice. SEBI has now clarified that this is not permissible. Even if the influencer engages in restricted activities through a third-party platform, the SEBI-regulated entity is still in violation of the rules.

This regulation ensures that no matter how the content is delivered—whether via social media, YouTube, or any other digital platform—brokerages cannot engage with individuals offering unregistered financial advice.

Is Investor Education Still Allowed?

Yes, investor education is still permitted—but with strict guidelines. SEBI allows for investor education, but educators cannot be involved in any of the restricted activities, such as offering unregistered advice or using market data to make specific investment recommendations. For instance:

  • Educators are prohibited from using recent market data to provide advice or predictions about specific securities, including future price movements.
  • Real-time market trading sessions and screen-sharing of live trading during webinars are also not allowed, as they were often seen as a way of offering unregistered investment advice in disguise.

How Does This Affect Finfluencers and Educators?

This new clarification will have a significant impact on financial influencers and educators who previously relied on real-time market data and trading advice in webinars or digital sessions. They will need to change their approach to ensure that they’re no longer crossing into the territory of unregistered investment advice.

SEBI’s Commitment to Investor Protection

With this new circular, SEBI has made it clear that it is committed to protecting investors from misleading or unregulated advice. By closing loopholes and tightening regulations around referrals, client information sharing, and digital platform marketing, SEBI is reinforcing its role as a watchdog in the financial sector.

This latest move marks a decisive step in ensuring that only properly registered and qualified professionals can offer investment advice to the public, protecting investors from the risks posed by finfluencers and unregulated advice sources.

Conclusion: A More Secure Regulatory Environment

SEBI’s recent move to clarify the regulations surrounding brokerages and unregistered financial advice is a major step toward tightening investor protection. The new rules, along with stricter controls over digital marketing platforms and influencer associations, ensure that only registered and compliant entities can offer financial advice.

As SEBI continues to close gaps in its regulatory framework, brokerages and financial influencers will need to adjust their operations to align with these new standards. This change ensures a safer and more transparent environment for investors, reinforcing the integrity of India’s financial markets.

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