Sebi’s proposals may raise compliance costs for smaller digital platforms

Regulated entities should prepare for higher expenses if the proposed framework by the Indian capital market regulator for recognizing specified digital platforms is implemented, according to experts. While due diligence, notice-and-takedown regulations and badging of approved users are common for significant platforms under existing Indian and global norms, implementing Sebi’s mandate about SDPs using AI and ML tools to identify content “related to a securities” will prove to be more challenging, said Arun Prabhu, partner and head of technology at law firm Cyril Amarchand Mangaldas. But purchasing sophisticated and advanced AI and ML tools “will be expensive, and the financial implications will be more pronounced for smaller digital platforms,” said Rajiv Sharma, a partner at law firm Singhania & Co. “As a matter of practice, foreign jurisdictions grappling with similar issues tend to hold entities providing misleading information liable rather than the platforms,” said Moin Ladha, partner at law firm Khaitan & Co. “Given the volume and nature of content such SDPs may host, it will be interesting to see how this is managed in the Indian context.” Others also proposed that Sebi establish a specific authority staffed by experts to supervise and regulate SDPs. Regulators worldwide are grappling with individuals posing as ‘finfluencers’.” Comparing the situation in India to international frameworks, Nair said regulatory bodies in Australia and Europe have begun implementing measures against misleading financial advice from influencers.