Sebi’s finfluencer rules to hurt foreign brokers

The Securities and Exchange Board of India’s bid to tighten regulations on financial influencers, or finfluencers, could have unintended consequences on overseas banks and brokers providing services to foreign portfolio investors, two people familiar with the matter said. However, many foreign banks and brokers offer bundled services, comprising broking, custodian and research services, making it difficult to ascertain the value of just the research services, said a custodian privy to the development. “The proposed mechanism could potentially disrupt most banks’ research payment mechanism in APAC and India, and create additional frictions operationally to price, monitor and reconciliation of those payments with institutional clients," Asifma said in its response. “Altering existing broker-dealer market mechanisms by which research is paid for carries the risk that there could be unintended consequences to the research market ecosystem and by association the capital markets, including the possibility of reduced stock coverage, impairment of overall market transparency and potentially the ability of small-medium cap companies to access capital." “Sebi’s idea is to cut the unregistered advisers, and that concern doesn’t apply to FPIs since they generally employ the big banks and brokers to provide research service," said the second person cited above.