The Securities and Exchange Board of India (SEBI) has been cracking down on unregistered investment advisers in recent years. In fact, over the last one month, a few well-known unregistered investment advisers have faced penalties, suggesting that this could be the beginning of a regulatory crackdown by SEBI on individuals offering financial advice without proper registration. Recently, Finance Minister Nirmala Sitharaman also acknowledged the concerns regarding financial influencers in India and cautioned about the risks associated with Ponzi apps that claim to provide financial solutions. While there is currently no proposal to regulate these financial influencers, she emphasised the importance of exercising caution. The minister highlighted that while there may be a few individuals offering objective and reliable advice, there is a higher proportion of influencers, about seven out of ten, who may be motivated by factors other than the investors’ best interests.
SEBI’s crackdown on unregistered investment advisers has been met with a mixed response. Some investors have welcomed the move, while others have expressed concerns that it could stifle innovation in the financial services industry.
Nevertheless, the benefits of SEBI’s crackdown on unregistered investment advisers outweigh any potential drawbacks. By cracking down on unregistered investment advisers, SEBI is helping to protect investors from frauds and ensure that they receive sound financial advice. This is a positive development and we believe that it will help to promote the growth of the Indian securities market in the long run. There are various reasons why we appreciate SEBI’s actions against unregistered investment advisers, one of them being that these are in the interest of the overall investment landscape. Some of the other reasons are outlined below:
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