Introduction
In March 2025, the Securities and Exchange Board of India (SEBI) barred Asmita Patel and six other financial influencers because they were allegedly “selling illegal stock tips disguised as investor education and making millions of rupees in the bargain.” In 2021, the influencer economy surged from approximately $2 billion to nearly $13.8 billion, supported by roughly 50 million content creators in the US. India’s market boom after the pandemic attracted a lot of small retail investors. Online trading accounts increased from roughly 36 million in 2019 to over 150 million last year, according to brokerage firm Zerodha. The impact they bring to the table cannot be ignored. Social media is flooded with influencers, popularly known as “finfluencers”, sharing opinions and advice about the financial market and its issues. These financial influencers often state that they teach you what school missed. However, this advice is frequently misinformation or promotion disguised as opinions or personal stories. Thus, SEBI in India has made efforts to regulate these “finfluencers”. It first released a “Consultation paper on the Association of SEBI Registered Intermediaries/Regulated Entities with Unregistered Entities (including Finfluencers) in August 2023 and then introduced Section 16A of the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2024. Later, it was followed by a circular on January 29, 2025. This Article seeks to explain what registered and unregistered intermediaries are and what efforts SEBI has made to regulate them. It analyses the challenges SEBI faces in regulating the Finfluencers and makes comments by analysing cross-jurisdictional efforts for the same.
Sebi’s Proposed Regulations
Intermediaries are governed by the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, with the most recent amendment made in August 2024. Intermediaries act as a bridge and facilitate the relationship between securities issuers and investors. Given the inherent risks associated with the stock market, the government needs to regulate investment advisors. Consequently, intermediaries are required to obtain registrations to facilitate their participation in the market. Section 15 of the regulation restricts an intermediary to not rendering any investment advice unless disclosure of their interests is made.
Similarly, through the amendment, it restricted any person regulated by the board or its agent to not indulge in two activities: giving advice/recommendations about securities without SEBI registration/permission and making claims about returns or performance of securities without SEBI’s approval. This rule thus prohibits brokers, mutual funds, and merchant bankers from associating with financial influencers who are not permitted or registered with SEBI. This move doesn’t explicitly bar partnerships and collaborations with financial influencers, but it is significant in curbing the practice of unsolicited advice and claims to innocent investors. Explanation 4 clarifies that this rule does not apply to someone doing investor education, subject to the condition that the person shall not make return claims and offer advice. The circular issued on January 29, 2025, prohibits the distribution of hidden real-time trading suggestions by allowing financial educators to use stock price data with a three-month lag. By making unapproved market projections inadmissible, this legislation is expected to reduce the provision of illegal advising services.[1]
The Regulatory Gap
There are multiple concerns regarding the implementation of this rule. Firstly, how would SEBI govern cross-border and anonymous operations? A person operating accounts from outside India can make SEBI’s jurisdiction hard to enforce. For example, a US resident can post – “Best stocks to invest in the Indian market.” In this scenario, how is SEBI authorised to act upon the person, as the same rules don’t apply to them? Additionally, there is a lot of ambiguity surrounding the word “associated”. If a finfluencer and a SEBI-registered broker share office space or exchange knowledge informally, does that become “association”? No clear answer.[2] SEBI has left the term association to be interpreted broadly. However, this also paves the way for critics to call it arbitrary. Further, when influencers try and sell their advice under the guise of personal opinions, it becomes extremely difficult to ascertain because of a lack of established criteria to assess. One of the biggest games is that SEBI has no machinery actively and efficiently working to trace such transactions. How is SEBI going to monitor hidden financial arrangements, and how does SEBI expect intermediaries to self-report their associations? Recently, a SEBI official made a remark that in order to combat sophisticated forms of market manipulation, such as algorithmic trading abuses and gamma-based strategies, SEBI is bringing in specialised talent, including PhD researchers, and has improved its technology to detect violations in real time.[3] Lastly, if an innocent investor wants to report an illegality, what established channel does SEBI provide? The Answer is NONE by SEBI.
Global Stories
Globally, it is more or less the same. There is not much from which India can derive its lessons. In the EU and the US, Influencers must disclose sponsored content. Specifically in EU, Finfluencers must refrain from misrepresenting themselves as customers in accordance with the Unfair Commercial Practices Directive (UCPD), which imposes penalties for noncompliance. Influencers are subject to the EU’s Market Abuse Regulation, MiFID II, and Commission Delegated Regulation 2016/958, which require them to disclose conflicts of interest and make impartial investment recommendations. While the Commission Delegated Regulation mandates a clear separation of facts from opinions, MiFID II establishes criteria for investment advice, reserving individual advice for registered financial advertisers; this stands as a stricter rule for governance than in India. Social media companies enforce content moderation guidelines and impose sanctions for noncompliance. Twitter has gone far with it and has banned finance-related content in many countries, like Luxembourg. Social media platforms do not seem to comply similarly in India with SEBI’s regulations.
Suggestions
There is a need to regulate financial influencers as their behaviour online can be harmful to innocent investors. Thus, SEBI has released rules, but are these rules enough? The rules may be significant in promoting influencers to register and operate for their legitimate business needs. However, the rules are pretty much vague, ambiguous and not easy to implement.
SEBI and other regulatory bodies around the world should try to increase transparency. Increased Transparency will help innocent investors in differentiating between professional advice and harmful non-authorised claims disguised as opinions. For this, there should be a stricter ban on financial content, making it difficult to operate without being registered. There should also be mandatory disclosures related to every smaller risk. SEBI should also put direct liability on social media platforms for non-compliance with the rules, and lay down a certain positive duty on the platforms. SEBI should also establish a grievance redressal mechanism for this process and enable direct reporting of such illegality to SEBI rather than through any other platform. Lastly, SEBI should also form a criteria to assess association and lay down unambiguous rules with more clarity.
Referance
[1]Vidhi Sharma, ‘NLR BLOG BY NLIU LAW REVIEW’ (SEBI’s Crackdown on Finfluencers: A Legal and Regulatory Perspective) <https://nliulawreview.nliu.ac.in/blog/sebis-crackdown-on-finfluencers-a-legal-and-regulatory-perspective/> accessed 6 September 2025.
[2] ibid.
[3] Neha Joshi, ‘Livemint’ (Sebi raids top Mumbai finfluencer in crackdown on market malpractices, 21 August 2025) <https://www.livemint.com/market/stock-market-news/sebi-search-operation-sebi-finfluencer-crackdown-financial-influencers-india-kamlesh-varshney-sebi-illegal-trading-11755762739298.html> accessed 8 September 2025.
4. https://legal.pwc.de/en/news/articles/eu-reiterates-rules-to-regulating-finfluencers.
5. https://www.bbc.com/news/articles/cddyye3zplno.
6. https://www.nber.org/system/files/working_papers/w31243/w31243.pdf.
7. https://legal.pwc.de/en/news/articles/eu-reiterates-rules-to-regulating-finfluencers.
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Author: Miss Uma Pareek is a 3rd-year B.A., LL.B. (Hons.) student at Dharmashastra National Law University in Jabalpur.
