Introduction:
On January 29, 2025, the Securities and Exchange Board of India (‘SEBI’) issued updated guidelines pertaining to unregistered individuals providing stock market education. The revised guidelines stipulate that (1) educators may only utilize data with a three-month lag, (2) must obtain prior SEBI approval before offering any investment advice, and (3) prohibit registered entities from establishing associations with unregistered entities through any means, including financial transactions. The prohibition against using live data is a deathblow to these finfluencers as their market speculation model heavily relies on that.
As part of a larger effort by SEBI to prevent unregistered influencers from spreading false information in order to safeguard the investors, this circular updated the previous guidelines, which were published on 22 October, 2024 that prevented the association of registered and unregistered entities. In this blog, the authors critically analyse the emergence of the term “Finfluencer” in the current security market realm and how a regulatory gap persists in SEBI guidelines of 2013 and 2014, and the recent 2024 guidelines which fails to resolve the innate problem of economic losses faced by the victim, penalization clauses for offenders, and the problem of influencers running beyond the country border and their regularization. Several countries, like Australia and France, have come up with similar policies. Is it a possibility that the same can be applied in SEBI’s upcoming strategies for market regulation?
The rationale behind the regulatory framework:
The financial advice provided by influencers lacks the intricacies of the secondary market, as most of the information remains unchecked by formal authorities, and having no accountability to consumers for losses incurred in the future, resulting from the content aggravates the problem.
Conversely, emphasis was given more on influencing the masses through catchy content on social media to generate their share of profit by transferring their followers to various trading platforms. In 2023, P.R. Sundar, a YouTuber and financial advisor, violated SEBI (Research Analysts) Regulations 2014, Regulation 3 which requires mandatory registration of financial advisors. He promoted a company in which he owned 50% of the stocks through his investment courses. Moreover, social media influencers, with their conventional approach, often share misleading information; a prominent example is comparing the low price of a successful entity’s stock when it was in its initial stage with the current price. In 2009, Bitcoin started with an opening of $0, and its current value is through the roof. This is an exceptional scenario, but financial gurus on social media sold this rarity as a norm. This blanket sale of exceptional stories without considering the risk and analysis of the majority of stock failures led to heavy losses for consumers. letting commoners lose their hard-earned assets. Recently, in February 2025, well-known Finfluencer Asmita Patel, owner of Global School, a trading platform that sells courses to familiar people providing financial advice on the stocks and security exchange, committed fraud of over Rs. 100 crores. According to reports, they induced the buyers to stocks of specific entities and recommend opening their trading accounts from a particular platform, leading to losses; they were directed to repay Rs. 53 crores to investors for infringing SEBI guidelines.
An investment advisor (‘IA’) or a broker and intermediary registered under SEBI (Investment Advisors) Regulations, 2013, are only allowed to give professional advice, including sharing information of potential risk with the client, and along with that, restrictions were imposed on using any recent three months’ data for advice on any stocks and security exchanges.
These guidelines were enacted, perceiving the threat that social media influencers with huge audiences can manipulate their audience by blindfolding them to buy the securities, not knowing that creators are paid heavily for these acts. Creating a conflict of interest and not acting in the best interest of their client goes contrary to the work of a regulated financial advisor (RFA). Even with correct financial advice, the lack of a minimum qualification to be an advisor contradicts Section 7 of SEBI Rule (RA) Regulation 2014 , and the dissemination of the same advice through social media platforms makes it against (IA) Regulation 2013 of SEBI , which makes any transmission of information via “platforms that are assessable to the public at large” to be a non-financial advice.
Beyond the Surface: Identifying Key Gaps in SEBI’s Regulatory Measures:
Policy Analysis:
The updated guidelines represent a broader effort by SEBI to control unregulated investment advice from unregistered users to protect the consumers. Regulation 16A of SEBI, 2008 states that regulated entities or their agents are barred from ‘associating’ with unregistered authorities who provide investment advice or claims about the performance of stocks without SEBI’s authorization. Unregistered authorities solely focused on investor education are exempted from the above rule, provided they refrain from speculating return claims, they should not rely on real-time market data (three months lag). The regulated entities must terminate their contracts with the violators by January 2025. There are specific provisions for non-compliance, which include fines, suspension, and cancellation of registration. Entities registered are themselves responsible for their agents (marketing agencies, policy distributors) for the compliance of rules.
Gaps in the Regulatory Framework:
Unregulated framework within SEBI may lead finfluencers to label their content as education-based while subtly providing investment advice, thus, exploiting by circumventing the regulatory restrictions. It places the onus on these regulated entities to monitor their associations without providing standardized compliance guidelines. These entities may struggle to keep track of their associations due to a large number of relationships and due to third-party involvement in many of them. Keeping track of such a large number of posts and content on social media requires adequate infrastructure, which SEBI currently lacks. The term ‘finfluencer’ still remains undefined under Indian law, opening a horizon that can be exploited. This lack of clarity equips these unregistered influencers to exploit the grey area, where they may resort to misleading or fraudulent practices without scrutiny or regulation.
How Have Countries Responded: Via law enforcement or alternative approaches?
Across various countries, the jurisdiction of unregulated advice was restricted by structuring laws on it; in Australia, the Australian Securities & Investments Commission (ASIC) has mandated that any advice or opinion should be given in the interest of the client with a compulsory requirement of an Australian financial license to be a finfluencer. These policies help in demarcating the difference between accurate and loose, biased financial information.
The UK’s recent FCA guidelines under Section 21 defined “financial promotional restriction,” in which a person giving advice cannot influence his client’s investment for his interest, of which a breach will result in a 2-year jail term or imposition of an unlimited fine. Besides, a warning slide in social media channels was mandatory for high-risk investments such as crypto assets and crowdfunding.
In France, a certified course for financial advisors named “Responsible Influence Certificate” is a training module on general laws of the secondary market, which includes investment advice, communication to investors, and checking the authorisation of shares. This training program promotes the fair, professional conduct code and restricts any dissemination of malpractices or fraud with investors.
Misplaced confidence in “Finfluencer”: A transnational issue?
This issue of an unregulated market is also being recognized and dealt at a global level by an international organization named The Board of the International Organisation of Securities Commission (‘IOSCO’) that guides the world securities and regulation market with around 130 countries in its jurisdiction. It analysed the concerns regarding the global plague of unregulated markets and suggested cross-border regulation due to the trans-border nature of this problem. Similarly, a survey by Ba Fin Journal in Germany noticed an upsurge of individuals aged 18-45 trusting social media more than research analysts or agents of the securities market for financial knowledge, out of which 60% approved it as an alternative to professional advice. Reforms are needed to change this scenario by providing enough data for ordinary people to train and simplify the secondary market process for investors by ending the role of intermediaries.
Conclusion and Suggestions:
SEBI’s latest guidelines represent a comprehensive effort to control misinformation and proactively safeguard investors. Prohibiting real-time data for market speculation and investment advice or making strict rules to prevent association between registered and unregistered entities represents an effort to control the manipulation spread in the name of ‘investor education.’ While these measures are necessary, they represent just the beginning – not the end of the battle against financial misinformation. The ambiguity around ‘investor advice’ and the definition of finfluencers represents loopholes that can be exploited.
SEBI needs to adopt a system that holds these influencers accountable for their work. A well-structured regulatory framework should follow a dual approach- one that emphasizes a structured responsible mechanism in consultation with key stakeholders alongside drawing from the best global practices that foster efficiency and accountability. It can have mandatory certification covering essential conduct, financial principles, and interest disclosures. SEBI can also launch its financial portal with real-time data, a financial literacy portal, and curated tutorials for investors to access easy and reliable financial advice.
SEBI’s regulations to counter the ‘get rich quick’ culture comes as an appreciable effort, but lasting change comes when society evolves itself. By merging strict oversight with financial education, India can transform its market space through transparency rather than viral hype.
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