‘Sebi to prohibit use of live mkt data for investor education’

Mumbai: Sebi chairman Tuhin Kanta Pandey on Monday said the markets regulator will soon change the rules to prohibit the usage of current live market data for investor education.

The comments came days after Sebi imposed a penalty and ordered disgorgement of Rs 546 crore on ‘fininfluencer’ Avdhoot Sathe.

Pandey asserted that there is no “regulatory vacuum” with educational rules and added that there may be a “lack of understanding” in this aspect.

“Our regulations clearly say that one cannot give stock tip advice,” he told reporters on the sidelines of an event at the largest equity bourse, NSE, here.

He, however, admitted that there has been “inconsistency” in two Sebi circulars dealing with usage of live data for educational purposes and added that Sebi will soon address the issue.

“It is true that there has been an inconsistency in two of our circulars dealing with live data. We will get the consistency on it. Only past market data will be used for educational purposes; current data should not be used,” Pandey said.

Sebi had slapped a heavy penalty on Sathe and asked for the disgorgement of over Rs 546 crore of gains.

Citing findings from a recent regulator survey, he rued that 62 per cent of respondents said they made investment decisions based on finfluencer recommendations.

Speaking at the launch of the Past Risk and Return Verification Agency (PaRRVA), Pandey said ‘finflu-encers’ often lure investors with exaggerated or fabricated returns and unscrupulous intermediaries further fuel investor uncertainty with exaggerated claims.

Just over a third of the investors said they had adequate knowledge of the securities market, leaving a large group vulnerable to unverified claims, he said.

There is a need for credible performance data to manage expectations and promote “responsible in-vesting”, he added.

Moreover, the markets regulator issued modalities for migration of existing Alternative Investment Fund (AIF) schemes into accredited investor only (AI-only schemes) or Large Value Funds (LVFs).

This migration is subject to obtaining positive consent from all the investors and meeting the respective conditions, Sebi said in its circular. This came after Sebi, in November, amended rules and facilitated the introduction of a separate category of AIF schemes, limited exclusively to Accredited Investors only (AI-only schemes), and offered the scheme-specific regulatory flexibilities in terms of less compliance around investor protection and extended additional relaxations and operational flexibilities to Large Value Funds for accredited investors.

In its circular, Sebi said that any new scheme proposed to be launched as an AI-only scheme or LVF will have the words ‘AI only fund’ or ‘LVF’ added to the scheme name at the end, respectively.

Such conversion and change in the name of the scheme is reported to Sebi by emailing to [email protected] within 15 days, and such a change in the name is reported to depositories for carrying out necessary changes in their system within 15 days.

In respect of the AI status of investors, if investors are an AI at the time of onboarding into an AIF scheme, they will be reckoned as an AI through the life of the scheme, even if they were to lose such status in the interim. Sebi noted that the maximum extension permissible for AI-only schemes will be five years, inclusive of tenure extended, prior to conversion to an AI-only scheme or an LVF scheme.

Further, it has been decided to exempt LVFs from following the standard template of placement memorandum and annual audit of the terms of placement memorandum, without the requirement of specific waivers from investors.