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Beyond Likes and Shares: The Conundrum of Finfluencers & Investor Protection

[Ms. Nandni Gilda & Mr. Ishaan Saluja are fourth-year law students at Hidayatullah National Law University.]


The securities market nowadays is no longer restricted to traditional media sources like newspapers, radio, or television. With the advent of digital platforms like Instagram, YouTube, etc. the source of information has now been diversified and many social media influencers including celebrities play an active role in influencing the market. These platforms act as a convenient and low-cost source of information for individual investors to do research for their investment decisions. However, it also exposes such investors to the Ponzi schemes of unregistered Finfluencers.

In light of rising incidents of market speculation through unsolicited information, The Securities & Exchange Board of India (SEBI) on 25th Aug 2023, came up with a Consultation Paper on Association of SEBI Registered Intermediaries/Regulated Entities with Unregistered Entities (including Finfluencers) to introduce a comprehensive regulation on the liability of Finfluencers and their collaboration with the SEBI Registered entities.

This article will deal with the impact of Financial Influencers (Finfluencers) and unauthorized information in the new-age investment market and analyze SEBI’s proposal to combat the same. 


As per the Advertising Standards Council of India, “An influencer is someone who has access to an audience and the power to affect their audiences’ purchasing decisions or opinions about a product, service, brand or experience, because of the influencer’s authority, knowledge, position, or relationship with their audience.”

Finfluencers for the purpose of this article can thus be considered as a person/entity having access and power to influence the financial decisions of the public at large. The problem of finfluencers is not new in the Indian Stock Market and has been acknowledged by the Indian finance minister, who has made concerning statements about losses to the investors due to advice and tips from these unregistered Finfluencers. Further, these influencers with a high reach extending to even millions of followers have a high potential to contribute to the unsolicited information which leads to problems like pump-and-dump schemes, etc.

The recent trends have shown rampant growth of fraudulent activities by the influencers making investors gullible to losses. Recently, SEBI found actor Arshad Warsi to be involved in a Pump & Dump scheme through a YouTube channel and allegedly making a profit of around Rs. 30 Lakh. Pump & Dump schemes are generally used to create artificial demand for a particular security through endorsements by influencers, thereby increasing the prices of the shares and consequently dumping such prices when the stakeholders have booked their profits.

In another high-profile case, SEBI barred Mohammad Nasir aka “Baap of Chart”, a Finfluencer on YouTube, for carrying out illegal advisory services and earning a whopping amount of Rs. 17.2 crore from various investors. Further, SEBI in its Zee Business order, took into consideration the social media presence of guest experts allegedly involved in making unlawful gains under the garb of expert recommendations.   Such an order also shows a shift in the approach taken by SEBI to combat the perils of finfluencers and protect gullible investors.


The issue of misinformation and liability of influencers have been addressed by various authorities. The first of such guidelines was released by the Advertising Standards Council of India (ASCI) which provided for Disclosure and Due diligence requirements for influencer advertising in Digital Media. The guidelines further added that the Health and Financial Influencers shall have the necessary qualifications and shall be duly registered.

Later, the SEBI took charge of regulating the association of unregistered entities and released a Consultation Paper in Aug 2023 which aims to devise a robust mechanism to disrupt the revenue model of Finfluencers. The paper highlighted that such unregistered Finfluencers earned hefty amounts by inducing clients to buy certain products or services and charging referral fees and other non-cash benefits in exchange. The paper proposed a two-fold model to disrupt their financial gains, firstly, by ensuring that the registered entities shall take active measures to ensure that they have no association/relationship with any unregistered entity, and, secondly, the board proposed to develop an online fee payment platform for registered intermediaries to identify and set apart the unaccounted payments to the unregistered entities.


The problem of unregistered Finfluencer and spread of unsolicited information is an issue of international concern and stock market regulators around the world strive to combat these issues through comprehensive regulations.

The UK regime on the spread of misleading information is a simple one, where criminal liability is imposed on any person (both registered and unregistered entities) who is involved in spreading any misleading statement or creating false information. Further, they have a strong monitoring mechanism to prevent any leak of information that may create a “false market” condition.

On the other hand, the US regulators have a more comprehensive regulation. The New York Exchange rules mandate that no company member shall engage in spreading any misinformation which may affect the “market conditions”, further they shall clarify any misleading fact spread about them and actively accept or deny such facts to prevent any artificial price movement. Another commendable initiative of the US Securities and Exchange Commission is the PAUSE Program. Through this program, they maintain a database of all the entities that are falsely claiming to be registered or impersonating registered financial advisors. Such an advanced program keeps a continuous check on the unsolicited flow of information from unauthorized sources and also helps investors to be aware of such market practices.


There has been a rising tendency of social media to influence the investment behaviour of people around the world. They rely on various governmental and even non-governmental websites and channels to make the so-called “right investment decision”. The Indian regulators have indeed succeeded in creating one of the most advanced regulatory frameworks for the stock market. However, there is still room for improvement in the aspect of investor education and awareness.

Creation of Defaulter Database

Inspiration can be taken from the PAUSE Program of the US to create a robust database of illegal advisors operating in India so that any unsolicited information or advertisement can be curbed more efficiently and the investors will have better access to information related to these entities. Currently, SEBI issues public notices against various illegal advisors, which become a part of its repository, however, the inconvenience involved in accessing every single notice against innumerable individuals eventually renders it ineffective for small investors.

Guidelines for Digital Platforms

With the rise of Finfluencers in the digital era, platforms like YouTube, Instagram, and X will play an important role in educating investors to make informed investing decisions. Creating a database and identifying thousands of unsolicited entities is still a long way for SEBI and will require a highly advanced monitoring system. Till then, SEBI may issue guidelines for these platforms to caution a large section of the audience about the activities of illegal advisors in a two-fold manner.

Firstly, the platforms shall mandate the requirement of SEBI registration numbers for any person/entity creating an account as a “financial advisor” on their platform and further, provide verification marks to such people who are registered with SEBI.

Secondly, these platforms have time and again helped in curbing the spread of unauthorised information by deploying their fact-check feature and displaying pop-ups to their users to take caution while consuming content on their platforms. The same strategy can be used on accounts that are not verified by social media platforms. This will curb the spread of misinformation which can materially affect the price of securities in the stock exchanges.


The changes proposed by SEBI are a welcome move and it is yet to be seen how these proposals will combat the issues highlighted in the article in the coming times. The proposed changes are in line with the vision of SEBI to promote investor protection and maintain market integrity. This move however would be challenging for SEBI as it will have to balance the interests of registered entities as well as the security of investors in the market. It shall also adopt the mechanisms used in other advanced jurisdictions to make a comprehensive regulation dealing with Finfluencers and the issue of marker rumour.

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