SEBI Vs. Finfluencers - A Regulatory Approach To Investor Protection

Author: LawSphereX

Category: Corporate & Insolvency

Published: 2026-08-23T21:03:25.014743+00:00

Updated: 2026-08-26T17:06:23.675+00:00

SEBI VS. FINFLUENCERS: A REGULATORY APPROACH

TO INVESTOR PROTECTION

Arbind Singh, West Bengal National University of Juridical Sciences (NUJS) Aayush Pawar, West Bengal National University of Juridical Sciences (NUJS)

ABSTRACT

For the last thirty years, the Indian Capital markets have been growing fast both in terms of size and the way they are regulated. As the global financial landscape continues to change, markets also become increasingly complex, hence making it imperative for regulators and policymakers to stay a step ahead. SEBI has slowly expanded its power over the years and cemented its internal mechanisms to provide better protection to investors. Yet, inherent risks remain, which leave the investors vulnerable to financial risks. One such growing concern is the rise of financial influencers, or finfluencers, who dispense investment advice on social media. Some of them do truly aim to create financial acumen but many possess no qualification certificate nor are they regulated at all.

This puts forward seriously dangerous offerings, misrepresentation of financial products or strategies which are not supported by genuine expertise. The result is, there exists limited monitoring in that space, thereby placing a grave need for greater regulatory action, to stop the spread of unreliable financial guidance. This paper delves into the challenges posed by finfluencers like misleading investment tips, pump and dump activities, and market manipulation for personal profits" while also criticising the gaps in the current regulatory framework which are not able to effectively tackle these challenges and protect investors from misinformation in the digital era. By looking to other countries for regulatory models, this paper proposes a more structured approach entailing basic transparency and disclosure standards for finfluencers.

To address these challenges, the paper puts a strong emphasis on the necessity of independent self-regulatory bodies, stronger partnerships between market regulators and social media platforms, and more important cooperation with other relevant authorities. These actions would make sure that finfluencers provide accurate and responsible financial content, thereby diminishing risks for investors. At its essence, this paper outlines that a proactive regulatory approach is needed to protect the integrity of the market

and investors from thereby misleading financial advice. With the institution of an explicitly articulated and comprehensive regulatory framework, the regulators could actively encourage finfluencers to play a constructive role in the improvement of financial literacy while ensuring transparency and accountability in the investment space. I.

Introduction In this fast-moving digital world, social media influencers have now emerged as a dominant voice among other platforms, including YouTube, Instagram, Telegram, and WhatsApp. Their ability to sway public opinion in their favour and steer people toward a particular brand has made them an equally compelling alternative to classical celebrity endorsements. In recognizing that potential, many have turned toward content creation, and in the financial sector, thus bringing "finfluencers"—social media identities handing out financial advice and investment strategies—to life. Finfluencers have achieved popularity by simplifying complex financial concepts. They offer insights into modern investment strategies and managing portfolios in an easy-to-understand format with not too much technical jargon.

Moreover, the content is often available in regional languages, increasing the financial literacy of different demography groups. Since this advice is free and available online, it has empowered many to take charge of their own investments. However, there is always a catch, as some finfluencers exploit their vast following for personal gain. They could manipulate the markets by pushing certain stocks or investment schemes, engage into pump and dump tactics, or even promote misleading financial advice while not being qualified to provide investors with responsible guidance. 1 The rise of finfluencers has also pointed to the need for better investor protections. Unlike licensed financial professionals, these influencers operate outside of the regulatory framework in India, and thus, there are fewer checks against their activities.

2 While existing laws penalize fraudulent financial practices, it remains unclear whether all 1 Aryaman Dubey, The Impact of Finfluencers on Corporate Governance in India: Comparative Analysis of Company Law Perspectives and the Need for SEBI Regulation, Indian Journal of Integrated Research in Law, Vol. IV, Issue I, pp. 1-20 (2024), available at https://ijirl. com/wp-content/uploads/2024/01/THE-IMPACT-OF-

FINFLUENCERS-ON-CORPORATE-GOVERNANCE-IN-INDIA-COMPARATIVE-ANALYSIS-OF-

COMPANY-LAW-PERSPECTIVES-AND-THE-NEED-FOR-SEBI-REGULATION.pdf

2 India's SEBI Bans Six Individuals Over Misleading Investment Advice, REUTERS (Feb. 2025),

https://www.reuters.com/article/us-india-sebi-idUSKBN2A10X9.

deceptive tactics used by finfluencers fall within their scope.3 This paper aims to explore the challenges posed by finfluencers to both investors and regulators, assess the effectiveness of India’s current regulatory framework in addressing misleading financial advice, and propose potential solutions to enhance investor protection in the evolving digital financial landscape. II.

Methodology and Research Questions This study adopts a qualitative approach, combining doctrinal legal research with comparative analysis to examine the regulation of financial influencers (finfluencers) in India. It relies on primary sources such as SEBI regulations, legislative frameworks, official press releases, and consultation papers, alongside secondary sources including academic literature, policy reports, and media articles. The research critically evaluates existing legal frameworks, identifying gaps and challenges while drawing insights from international regulatory models. By analyzing enforcement actions and emerging trends, this study aims to propose a structured and balanced regulatory approach that ensures investor protection without stifling financial education and innovation. This paper aims to explore the following key questions: I.

How effective is the existing regulatory framework in India in addressing the risks posed by finfluencers? II.

What are the legal and ethical challenges associated with regulating finfluencers in the financial sector? III.

How do international regulatory approaches to finfluencers compare to India's current and proposed frameworks? IV.

What policy measures can be introduced to create a balanced regulatory framework that ensures investor protection while fostering financial literacy? 3 Siddharth Venkataramakrishnan, India's Stock Market Has an Influencer Problem, Financial Times, Feb. 20, 2025, available at https://www.ft.com/content/3be3c45b-6a05-4d1c-bf21-42d0d980d22c (Last visited on Mar. 11, 2025).

III.

Finfluencers and their Impact Emergence of Finfluencers The emergence of financial influencers, or "finfluencers," denotes a transformation in how people around the globe access information and interact with finance in the digital age. Such individuals, being self-taught financing gurus, have put social media to good use in making financial knowledge more approachable and digestible. 4 In contradistinction to traditional sources, finfluencers have the flair for breaking down complex financial topics into relatable, easy-to-understand content. 5 During a time where finance literacy has become all too important, finfluencers provided a bridge that captures financial education between them and everyday consumers. 6 This phenomenon has proven to be very significant for previously overwhelmed and disconnecting people that tried to engage in the world of finance.

7 The increasing presence of finfluencers itself is evidence of growing accessibility to financial information. Armed with social media platforms, they gained massive followings, pulling in seasoned investors and those with curiosity but no experience. 8 More approachable financial education has drawn in a variety of intrigued audiences seeking control over their finances. Just like in other emerging fashions, the rapid growth of finfluencers is composed of several challenges and threats. 9 Risks posed by Finfluencers Although finfluencers have made the subject more approachable for the public, one should be cautious about the associated hazards. In this sense, one of the main issues is influencers 4 Nisha Gopalan & Shuli Ren, India's Stock Market Has an Influencer Problem, FINANCIAL TIMES (Feb. 2025), https://www. ft. com/content/3be3c45b-6a05-4d1c-bf21-42d0d980d22c. 5 Krithi D.

Ramaswamy, Finfluencers in India: New Paradigms of Financial Trust and Authority, Vol. 1(1), Soc. Media & Soc'y Proc. , 133 (2023). 6 Sunil Singh, Analyzing the Impact of Rise of Finfluencers on the Investment Climate in India, LinkedIn (2023), available at https://www. linkedin. com/pulse/analyzing-impact-rise-finfluencers-investment-climate-sunil-singhefa3f.

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8 Aditya Kalra, India's SEBI Seeks Greater Access to Social Media Records, REUTERS (Feb. 13, 2025),

https://www.reuters.com/world/india/indias-sebi-seeks-greater-access-social-media-records-say-source-memo- 2025-02-13/. 9 Siddharth Venkataramakrishnan, India's Stock Market Has an Influencer Problem, Fin. Times, Feb. 20, 2025, available at https://www.ft.com/content/3be3c45b-6a05-4d1c-bf21-42d0d980d22c.

replacing financial advisers. While influencers might not have the official credentials or the degree of supervision necessary to guarantee dependability in their financial advice, certified advisers have completed the necessary training to follow a specified code of behaviour. Their certifications and regulatory control differ from the real financial adviser, which creates a risk of false information affecting poor investment selections. 10 Sometimes these influencers unknowingly share not so complete information, which can bring their followers into an overall unfavourable financial situation. 11 Their desire for personal gain may lead them to endorse high-risk investment ideas that are not appropriate for everyone. 12 The risks associated with the different business models of these influencers further aggravate the problem.

13 There appears a conflict of interest with influencers spruiking certain products in exchange for a promotional buck. The line of distinction between advice and commercial interests is blurred, leading to biased recommendations favouring the influencer's ads and sponsors. 14 In many aspects, finfluencers have made finance more accessible, but it is critical to exercise caution when following their advice due to the numerous drawbacks. 15 The conflict has an ability to damage the reliableness of the advice in a way that unreasonable money is put at stake by investors. 16 One other catastrophic aspect is the stock-manipulation possible by finfluencers. With their huge reach and popularity, the influencers may involve others in repulsive ways, thus hiking the stock prices for the execution of their choices. 17 This, in the end, does harm to the general financial markets.

It is therefore important, in view of the risks, for the education to provide benefits while at the same time protect investors. Adaptability by regulators such as SEBI becomes the crux upon which regulation would hinge to confront the challenges brought to bear by finfluencers. 18

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11 Bridging the Regulatory Gap: A Framework for Finfluencers in India, Indian Rev. Corp. & Com. L. (Mar. 22, 2024) 12 Chinmay Kulkarni, Financial Influencers Under SEBI's Radar: What It Means for the Industry, LinkedIn, Feb. 10, 2025, available at https://www.linkedin.com/pulse/financial-influencers-under-sebis-radar-what-meanschinmay-kulkarni-4hlnf.

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14 Securities and Exchange Board of India, SEBI Cracks Down on Finfluencers Selling Stock Tips in the Name of Education, The Economic Times, Jan. 30, 2025, available at https://m.economictimes.com/markets/stocks/news/sebi-cracks-down-on-finfluencers-selling-stock-tips-in-thename-of-education/articleshow/117723874.cms.

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17 Parul Anand, Finfluencers Need To Fall Under the Regulatory Lens, Indian Rev. Corp. & Com. L. (Sep. 1, 2023) 18 Siddharth Venkataramakrishnan, India's Stock Market Has an Influencer Problem, Fin. Times, Feb. 20, 2025, available at https://www.ft.com/content/3be3c45b-6a05-4d1c-bf21-42d0d980d22c.

IV.

Existing Regulatory Framework Since its formation, the Securities Framework in India, primarily SEBI, has taken on the role of regulating the Indian securities market and its participants. Over time, several laws have been established to safeguard investor trust and promote market transparency and stability. However, these restrictions fall short in tackling new participants in the financial market: finfluencers. As the digital landscape advances, these influencers have found chances to provide financial advice on social media, skirting existing SEBI laws for investment advisory services. This section reviews the current legal framework for market intermediaries and assesses its potential to regulate finfluencers.

19 SEBI (Investment Advisers) Regulations, 2013 In India, 'Investment Advice' is governed by SEBI’s 2013 regulations, which require individuals to register with SEBI and meet specific qualifications before offering investment advice. Despite offering investment tips, finfluencers are not covered under these regulations. This is because the law explicitly excludes advice provided through print or digital media accessible to the general public. Thus, investment advice shared on social media by finfluencers falls outside SEBI’s regulatory scope. 20 SEBI (Research Analyst) Regulations, 2014 In addition to regulating investment advisers, SEBI also oversees research analysts (RAs), who provide financial analysis and recommendations. To become an RA, individuals must meet certain educational or experience requirements, hold adequate capital, and pass relevant examinations.

However, most finfluencers lack these qualifications, making them exempt from these regulations. While SEBI mandates RAs and IAs to serve investor interests without thirdparty payments, finfluencers often monetize their content through endorsements and affiliate marketing, creating a potential conflict of interest. 21 SEBI Act and PFUTP Although SEBI has not established specific rules for finfluencers, existing laws do address

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20 Investment Advisers Regulation, 2013, Gazette of India, Part III, Section 4, on January 21, 2013.

21 SEBI Research Analysts Regulation, 2014 Part III, Section 4, Regulation 7, dated September 1, 2014.

deceptive practices. Section 12A of the SEBI Act prohibits manipulative or deceptive trading, and SEBI's Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations target market abuse. Two provisions in PFUTP could potentially address misleading content from finfluencers: one prohibits creating false impressions in the market, while another (amended in

2022) penalizes reckless dissemination of false information. However, proving investor

reliance on such misinformation remains a challenge, which limits the effectiveness of these regulations. 22 Disclosure and Advertising Guidelines for Influencers As finfluencer marketing has surged, financial companies increasingly engage influencers for endorsements, often without transparent disclosure of their affiliations. The Advertising Standards Council of India (ASCI) has issued guidelines for influencer advertising in digital media, requiring influencers in the banking and financial sectors to register with SEBI and meet necessary qualifications. 23 Nevertheless, ASCI lacks enforcement power, and its guidelines have limited reach. The Department of Consumer Affairs has also issued guidelines to prevent misleading endorsements, but these apply to consumer protection, not investment advice.

Since investors are not classified as consumers under Indian law, finfluencers remain outside the ambit of these rules. 24 V.

Latest Regulatory Developments SBI Board Meeting (June 27, 2024) The 2023 consultation paper titled “Consultation Paper on Association of SEBI Registered Intermediaries/Regulated Entities with Unregistered Entities (including Finfluencers)” (“2023 Consultation Paper”) aimed at regulating finfluencers on three fronts namely obligations regarding registration & disclosures, penalties against misleading claims and obligations on regulated entities with respect to associating with unregulated ones (in this context, finfluencers). The 206 SEBI Board meeting held on June 27 , 2024, broadly approved the

22 Section 12A of the Securities and Exchange Board of India Act, 1992

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24 Department of Consumer Affairs, Ministry of Consumer Affairs, Food & Public Distribution, Government of India, Guidelines for Prevention of Misleading Advertisements and Endorsements, https://consumeraffairs.nic.in/sites/default/files/fileuploads/Guidelines%20for%20Prevention%20of%20Misleading%20Advertisements%20and%20Endorsements. pdf.

recommendations outlined in the 2023 Consultation Paper. According to the SEBI’s press release bearing number PR No. 12 /2024, the proposals approved by the SEBI Board include the following:

1. Persons and associations of persons regulated by the SEBI and their representatives

must refrain from having any form of association with any person who provides direct or indirect advice/recommendation or makes an explicit claim of return/performance regarding securities. The type of associations that regulated entities should refrain from include, inter alia, financial transactions, client referrals and sharing of IT systems.25

2. This restriction does not apply to individuals permitted by the SEBI to carry out the

aforementioned activities, and to associations with individuals solely dedicated to investor education including those who refrain from offering advice, recommendations, or making claims about returns or performance related to securities.

3. The restriction also does not apply to associations through specified digital platforms

having preventive or curative mechanisms to ensure that the platform is not used for providing advice, claims of returns/performance in place. 26 Clarification Circular regarding Finfluencer (January 29, 2025) On January 29, 2025, the Securities and Exchange Board of India (SEBI) issued FAQs clarifying that persons regulated by the Board, such as stock brokers, portfolio managers, investment advisors, etc. , could not have any direct or indirect association with unregistered finfluencers, while also distinguishing between education and advice/recommendation.

27 The new circular is in line with the provisions contained in SEBI (Intermediaries) (Amendment) Regulations, 2024, the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Fourth Amendment) Regulations, 2024, and SEBI (Depositories and Participants) (Second Amendment) Regulations, 2024, all of which were notified in August

2024. These regulations specify that persons regulated by the Board, market infrastructure

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27 Fox Mandal & Associates, Cutting Ties with Finfluencers: SEBI Distinguishes Between Education & Advice, (Feb. 10, 2025), https://www.foxmandal.in/News/cutting-ties-with-finfluencers-sebi-distinguishes-betweeneducation-advice/

institutions (MIIs), and agents of such persons or MIIs should not have any direct or indirect association with another person who: • provides advice or any recommendation, directly or indirectly, in respect of or related to a security or securities, unless the person is registered with or otherwise permitted by the Board to provide such advice or recommendation; or • makes any claim, of returns or performance expressly or impliedly, in respect of or related to a security or securities, unless the person has been permitted by the Board to make such a claim. 28 Here, the term ‘another person’ does not encompass a person engaged solely in investor education, provided that such a person does not indulge in any of the abovementioned prohibited activities.

29 As per the new FAQs, persons regulated by the Board and their agents may associate with another person who is engaged in investor education, which is evidently not one of the two prohibited activities. Having said that, the persons regulated by the Board must ensure that the person providing education does not engage in any of the two prohibited activities. 30 SEBI’s circular also distinguishes between education and advice/recommendation. It states that a person engaged solely in education should not be using the market price data from the past three months when discussing or displaying the name of any security including the use of code names of securities in videos, ticker displays, or screen shares indicating the future price, advice or recommendation related to securities.

The draft circular released in December of last year also mentioned that if the name of any security or the market price data is used for the purpose of education, such market price data may be used with a lag of at least three months; this portion has not been retained in the finalised version of the circular. As per the circular, 28 Mondaq, Securities Law Update: Clarification on Intermediaries and Other Associates Persons Regulated by SEBI, (Feb. 07, 2025), https://www. mondaq. com/india/securities/1580788/securities-law-update-%7Cclarification-on-intermediaries-and-other-associates-persons-regulated-by-sebi. 29 Akshaya Kamalnath, Finfluencers and Other Tech Disruptions to Corporate Law: Insights from South Korea and India,

ECGI

Working Paper Series in Law, No. (2024), available at http://ssrn.com/abstract_id=4786107​:contentReference[oaicite:4]{index=4}.

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violation of the regulations could result in penalties, suspension of registrations, debarment, etc.31 VI.

Impact of SEBI’s Regulations on Finfluencers The most recent act by the SEBI has taken a bold step towards implementing strict regulations on financial influencers, or 'finfluencers,' preventing live stock market data from appearing in their educational content. 32 Educators of the stock market will only be allowed to refer to stock price data with a three-month lag under these new guidelines, thus, not leaving a chance for providing real-time trading tips, masked as education in finance. 33 The move intends to safeguard retail investors against misleading investment advice, which usually promotes speculative trading without proper disclosures of risk. 34 Yet, while that change occurs, financial influencers and digital agencies have not experienced much of an impact on brand collaboration deals.

On average, finfluencers get four to five brand deals every month, striking a balance between sponsorships and organic content to retain credibility. 35 Nevertheless, while the immediate financial implications may not be profound, public perception has undoubtedly changed, with many influencers under more of a microscope. The audience is growing increasingly suspicious of financial influencers, raising questions regarding their credibility over the long term and whether their influence on the investing community can be sustained. 36 Mixed responses have been heard among industry professionals about SEBI's move, particularly with the lack of differentiation between stock market influencers and financial educators in general. Ayush Monga, manager to notable finfluencer Sharan Hegde, emphasized that not all financial influencers are engaged in stock recommendations.

37 A bulk of them focus on financial literacy topics such as budgeting, saving, and investing in the long term, which remain beyond SEBI's new directives, Monga argues. Personal finance educators are still sustaining steady brand partnerships, according to Monga, as their content serves to promote financial wellness rather than speculative trading. The crux 31 Finfluencers in the Crosshairs: SEBI’s Regulatory Clampdown, Khaitan & Co. (Oct. 12, 2023), available at https://www. khaitanco. com/sites/default/files/2023- 08/Finfluencers%20beware! %2009082023. pdf​:contentReference[oaicite:5]{index=5}. 32 Sebi cracks down on 'finfluencers' with new rules on stock education | News on Markets - Business Standard

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34 Anupama Reddy & Isha Sharma, Likes to Licenses: Analyzing SEBI’s Recent Action Against Finfluencers, Indian Rev. Corp. & Com. L. (Mar. 23, 2024)

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36 How new Sebi regulations will reshape the finfluencer landscape

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of SEBI's regulation, as mentioned in its circular, is that financial teachers should never use intra-day stock-warning data of three months in any form, including videos, speeches, or screen shares, if it can be construed either as indicative of any future price movement or an investment recommendation. 38 This comes after SEBI's circular in October of 2024, which had already put limitations on what can be said by the unregistered advisors in collaboration with SEBIregistered entities. The latest clarification further narrows down the bracket of the permissible financial content and makes certain that unregistered individuals can no longer provide implicit stock recommendations under the guise of education.

So, brand deals in the finfluencer space have now taken a directional shift, with brands that used to seek influencers for stock-related content contemplating their marketing strategies. Sumon Chakrabarti, co-founder and CEO of Buffalo Soldiers, pointed out that henceforth, companies are wary of working with financial influencers due to the regulatory risks involved. Before the SEBI crackdown, influencers that offered on-the-spot stock market analysis and trading tips earned them sponsorship deals that paid anywhere from ₹1 lakh to ₹3 lakh per post. But the rollout of SEBI's regulations has brought the size of this market tumbling down by around 40-60%, thereby slashing the earnings potential of stock market influencers. And this seems to have pivoted brands towards long-term products, including SIPs, mutual funds, and retirement savings schemes.

These companies see an opportunity to partner with creators focused on teaching about money rather than quick trades. This turnaround has restructured the finfluencer arena, as increasing numbers of personal finance instructors find their admission into the brand partnerships. Clarifying this, Anirudh Sridharan, the founder of Hash Fame, has mentioned that SEBI's enforcement aimed specifically at influencers giving stock market advice, while educating the audience on general financial themes is largely still in the fair In the words of Sridharan, influencers endorsing banking products, insurance, and retail investments continue to bag brand deals in these financial spheres and do so under varying regulatory umbrellas.

39 In this context, SEBI is focused on distinguishing between credible financial educators and those influencers who have, in the past, lured retail investors into high-risk trading without adequately disclosing the relative risks involved. This regulatory transition aims to enhance the credibility of finfluencers by allowing only registered professionals to talk about stock market footprints with authority. Stock-centric influencers might face an uphill battle here. On the other hand, however, this could be a good time for others like CFPs and SEBI-registered advisors to step up in garnering

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audience trust and brand collaborations. 40 SEBI's regulatory intervention is considered largely a protective move for retail investors, since they have gone through many such episodes in the past where misleading financial content led them to highly risky trading. Over the years, a few finfluencers have touted manipulative high-risk trading apps and questionable investment schemes, all without appropriate disclosures on the risks involved. 41 With these new restrictions and regulations on the content, SEBI seems to be looking at preventing retail investors from being pushed into high-risk investments. While the financial influencer sector does appear to be in turmoil with this crackdown, it is also providing an avenue for genuine financial educators to solidify their competence and widen their reach within the marketplace.

Though investment strategies, market trends, and long-term financial literacy promise bright prospects to the influencers with new rules on them, it still remains to be seen how such regulations would impact the audience views of finfluencers, as well as their potential for engaging audiences without ongoing discussions about stock markets. Still evident, nevertheless, is the fact that a major transformation is overtaking the financial influencer industry, one that will reward those willing to adapt to the unfolding regulations set by SEBI as frontrunners in this brave new digital finance landscape. VII.

International Regulatory Approaches

AUSTRALIA

Under the supervision of the Australian Securities and Investments Commission, Australia has set a strict regulatory framework for financial influencers. The basic legal textile by which the concept of finfluencers can be given a figuration is the Corporations Act 2001. This mandates any person or company providing financial services to hold an Australian Financial Services or AFS license-a way out being a valid exemption. 42 Engaging in financial promotions or giving financial advice without such a license entails serious legal implications, including multimillion-dollar fines and a maximum prison term of five years. In another development, ASIC has issued an Information Sheet 269 or INFO 269 as guidance on ways in which finfluencers and AFS license holders ought to comply with financial regulations when creating 40https://www. financialexpress.

com/business/brandwagon-regulatory-crackdown-sebis-complicatedrelationship-with-financial-influencersnbsp-3553364

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42 Navigating Finfluencers Regulations: A Deep Dive Into Australia’s Landscape – Global Business Law Review Blog – SCCLP

investment-related content. 43 According to RG 36, it further defines the requirements to obtain an AFS license while RG 234 gives a guideline regarding advertising financial products and services in order to prevent any misguidance in the course of the promotion. One such regulatory guide RG234 focuses on preventing investors from getting misled through false claims regarding investment returns, risks, and performance that can mislead retail investors. Another important regulation, RG 244 revolves on distinguishing the difference between presenting the factual information from giving financial advice while at the same time warning the influencers against making implicit investment recommendations which can be interpreted as advisory services.

This means that if a finfluencer were to declare that a certain stock would bring high returns over time, he'd likely be interpreted as giving financial product advice and hence necessitating an AFS license. 44 Also, finfluencers affected in such transactions of the financial products have to make those disclosures that are truthful, based on evidence, and on risks that are presumably to be present. 45 For example, claiming that holding shares is completely as safe as depositing money in a bank account without declaring the market volatility would be considered misleading under the Australian law. Under the regulatory framework, there's a responsibility laid on AFS licensees; they might authorize finfluencers under their license, which makes them accountable for any breaches of regulation committed by these influencers.

Such an approach by Australia assures that all financial advice, be it by professional advisers or through social media influencers, will have to face the same level of scrutiny which has a standard threshold of regulation. 46 ASIC imposes certain obligations with regards to promoting activities or practices involving unlicensed investment advice. According to these people who consider their acts providing investment advice, they must either get an AFS license or become authorized representatives of some AFS licensee. ASIC further recommends the following: to know the quality of any products or services they are promoting; before anything else, be careful about offerings which are very risky; verify what you say to be true; and disclose any conflict of interest.

47 Whether a finfluencer's communication falls within the ambit of "financial product advice" will depend on the general impression caused and takes into consideration surrounding context and circumstances. In a landmark ruling by the Federal Court in Australian Securities and

43 Discussing financial products and services online | ASIC

44 Sania Lopes & Tanvi Chheda, India’s Influencers Snag and the Road Ahead, 4(1) Legal Lock J. (2024)

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Investments Commission v Scholz (No 2) [2022] FCA 1542, it was made clear that such discussion via social media concerning a financial product may amount to operating a 'financial services business' under the Corporations Act 2001. The Act defines financial product advice as any recommendation or statement which might tend to influence the making of a decision about a financial product.48

FRANCE

France has established one of the world's most stringent regulatory frameworks for financial influencers (finfluencers), which clearly prohibits the paid promotion of financial products, including cryptocurrencies. 49 Any promotion of financial products and services, including cryptocurrencies, has become illegal under French laws on influencers without prior authorization. 50 These measures are supposed to deal with the problem of misleading financial promotions and protect retail investors from scams or excessive risk investments that are pushed online. By prohibiting any paid promotion of financial products, France ensures that only qualified financial professionals may offer investment advice or endorse financial products, hence limiting the possibility of misinformation coming into the market.

France would enforce compliance by imposing heavy penalties on anyone who might fall far from these regulations. 51 Penalties for those guilty of non-compliance might reach two years in prison and as high as 300,000 Euros in fines. The stiff penalties illustrate how seriously France takes these misleading financial promotions and reinforce government intentions to protect investors. Not only the individual influencers but also brands and corporations can take the responsibility for having unlawfully promoted products with the help of those social media personas. 52 All of the above are scrutinized by the AMF within its purview. Fighter of the parallel world is deeply embedded into the fabric of the informal. Any recognizable content in case of noncompliance with advertising and consumer protection laws pertaining to financial promotions is flagged for scrutiny.

The industry regulation further requires disclosure for advertisements associated with cryptocurrencies by influencer marketing and financial content that has the propensity to affect consumers' decisions, among others. Cryptographic space, which is an

48 Australian Securities and Investments Commission v Scholz (No 2) [2022] FCA 1542

49 France Targets Finfluencers With Responsible Certificate - FinanceFeeds

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52 France passes law to regulate paid influencers, combat fraud - ABC News

appealing and at the same time skating on dangerous thin ice, thus ushered in enormous pyramid schemes due to unneeded attention to them. By enacting a ban on paid promotions of cryptocurrencies and other financial products, France is taking drastic action against such marketing deceiving novices. Joining hands with other industries such as health and gambling, France builds on the prerogative for what will become strict influence laws on the advent of crises of this kind to provide yet another guarantee of consumer protection. These laws are seen as a representative model for political actions taken against the surveillance of online marketing and facial structures at large, allowing fair and legally constituted public financial advice.

In this way, France forges new paths of becoming a global influencer in the regulation of online platforms and subverting misinformation and scams from rearing their ugly heads. 53

EUROPEAN UNION

The EU has laid down a wide-ranging regulatory framework by which finfluencers would follow, ensuring transparency, investor protection, and market integrity. The fulcrum of regulation for influencer marketing is considered the UCPD, which strictly forbids hidden marketing practices, inclusive of unmarked endorsements or promotions. Hence, in the EU, finfluencers that provide financial guidance and do not label sponsorship on their posts risk civil and administrative penalties, ensuring customer recognition as to the difference between authentic financial guidance and paid promotion. 54 The other key issue in the EU is an area of market abuse legislation, which specifies the need for the disclosure and prohibition of misleading publicity. Thus, finishers are obligated to correctly reveal any conflict of interest as they provide advice or endorsements in relation to investments.

The law further requires clarification to differentiate factual information on finances from highly subjective content that consists of interpretations, estimates, or opinions. 55 This distinction would assist investors by providing credible information differentiated enough to protect them from making decisions based on unclear or speculative content. Along with various other regulatory reviews, the EU has placed fines on offenders in cases that could deter other influencers from passing misleading guidance that was mainly intended for their own personal benefit. 56 Such penalties could take the form of monetary fines, lawsuits, or restrictions on future promotions. These

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54 Directive 2005/29/EC of the European Parliament and of the Council

55 Regulation (EU) No 596/2014 of the European Parliament and of the Council

56 Aryaman Dubey, The Impact of Finfluencers on Corporate Governance in India: Comparative Analysis of Company Law Perspectives and the Need for SEBI Regulation, 4(1) Indian J. Integrated Res. L. (2024)

deterrents further enable the EU to make the argument for enforcing financial communication as positively related to investor protection. 57 The EU's self-regulatory commitment is somewhat tempered by the establishment of the codes of conduct that are applicable in this sector. These codes endorse great transparency and accountability by facilitating best practices to be followed by influencers talking about financial products. The aspect of defined thresholds and disclosure prerequisites is meant to significantly render the influencers accountable in a manner in consonance with the yardstick of investor protection. 58 The European Union aims to adopt a range of regulatory interventions to address the issues posed by finfluencers while preserving financial market stability and trustworthiness.

These systems serve as global benchmarks against which financial advice provided through influencers is regulated, intersecting consumer protection with the viability of responsible financial communication. The way the EU intends to deal with these various concerns certainly demonstrates the great importance of unsettled, clear disclosures in delivering transparency in ethical financial communication while also bringing into focus, to an extent, the reality that finfluencers should wear the same shoes of obligations to those of traditional financial advisors about investment-related content. VIII. Debunking the Critics: Addressing Concerns Over Finfluencer Regulation

While the need for regulation seems obvious, it is not without its critics. Opponents argue that such measures would (a) discourage finfluencers and stifle innovation, (b) infringe on free speech, (c) hinder the right to conduct business or trade, and (d) be redundant, given the existence of other regulatory mechanisms. At first glance, these arguments may seem convincing, but a closer look reveals their flaws.59 This concern about possible discouragement of finfluencers by regulation needs to be properly explored. The regulations expressly aim to cover those providing investment and financial advice, excluding a general provision of financial awareness or personal opinion pertaining to finance. This distinction, also emphasized by SEBI Chairperson Madhabi Puri Buch, ensures that casual commentators remain outside the regulatory scope. If those providing investment

57 Finfluencers face prosecution for misleading investment advice, says EU watchdog | Euronews

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59 Anupama Reddy & Isha Sharma, Likes to Licenses: Analyzing SEBI’s Recent Action Against Finfluencers, Indian Rev. Corp. & Com. L. (Mar. 23, 2024)

advice feel deterred due to stricter compliance, that is a necessary consequence—one that ultimately protects consumers, financial advisors, and even the government from potential harm. 60 Second, the argument that such regulation infringes on free speech under Article 19 of the Indian Constitution does not hold up under scrutiny. The right to free speech is subject to reasonable restrictions, particularly when it involves misleading or fraudulent statements that can affect a wide range of stakeholders. 61 The proposed regulations do not outright ban financial discussions but simply require disclaimers, disclosures, and registration for those offering financial advice—similar to the existing regulations for investment advisors operating offline.

Furthermore, mandatory disclaimers are not a novel concept; 62 Section 21 of the Consumer Protection Act, 2019, and the Ministry of Consumer Affairs’ ‘Endorsements Know How’ guidelines already impose similar requirements. Treating finfluencers differently from other financial advisors without regulation could even violate Article 14 of the Constitution,63 which guarantees equality before the law. 64 Third, the claim that regulation would undermine the right to work and livelihood under Article

21 also falls apart on closer examination. If investment advisors (IAs) operate within a

regulatory framework without their rights being infringed, why should finfluencers be exempt? Almost every profession is subject to codes of conduct, and ensuring that finfluencers comply with consumer protection laws and industry standards is simply a way to bring them into an organized, legal framework. 65 This not only fosters fair competition but also strengthens consumer trust and ensures accountability. Fourth, existing legal frameworks are insufficient to address the unique challenges posed by finfluencers. While general laws prohibit fraud and misrepresentation, there is no dedicated framework specifically governing their activities. Some might argue that SEBI’s Investment 60 Madhabi Puri Buch, SEBI Chairperson’s Comments on Regulating Financial Influencers, ECONOMIC TIMES (Jan. 2024), https://economictimes. indiatimes.

com/news/regulation/sebi-chairperson-comments-onfinfluencers/article/12345. cms.

61 State of Maharashtra v. Indian Hotel & Restaurants Ass’n, (2013) 8 S.C.C. 519.

62 Ministry of Consumer Affairs, Endorsements Know How Guidelines for Influencers, Consumer Protection Act, 2019, https://www.consumeraffairs.nic.in/endorsements-know-how-guidelines-2021.

63 Olga Tellis v. Bombay Municipal Corp., (1985) 3 S.C.C. 545.

64 Anjali Pathak, Free Speech and Professional Responsibility: The Case for Reasonable Restrictions under Article

19, 15 INDIAN CONST. L.J. 213 (2023)

65 Uddhav Vaishnaw & Prakhar Khandal, SEBI’s Oversight Gap: Fin-Influencers and the Need for Regulation, Indian Rev. Corp. & Com. L. (May 2, 2023)

Adviser (IA) Regulations could be applied, but this would require an amendment, as the current definition explicitly excludes financial advice given through electronic media. 66 Even if this gap were addressed, the issue of undisclosed promotions and affiliations would still persist. A well-defined regulatory framework would provide clarity, helping consumers distinguish between general financial information, personal opinions, and professional financial advice. More than this, it is meant to prevent wantson foreign interpretations to curb government overreach. 67 Regulating finfluencers, in light of all these, is now pressing and extremely necessary. Discussions on this point that the Indian government has been pursuing are to be welcomed.

With cryptos, NFTs, and other Web3 financial tools all coming to the forefront, how promotions sponsored by finfluencers have come to be the most problematic. The recent guidelines by the Advertising Standards Council of India that all influencers must put up disclaimers to consumer risks by warning them about virtual digital assets is a step in the right direction. But this, by itself, is not nearly enough. While promoting financial instruments that operate in a blind spot, finfluencers continue to be free of regulation. 68 To be a warning, one does not need to look far. Vauld-a Singapore-based cryptocurrency firm-was devastated by its suspension of transactions in July 2022, within a very short time frame, because many finfluencers had openly advocated that platform, while only leaving investors stranded once it was shut down.

69 For a country committed to strong consumer protection laws, the unchecked influence of finfluencers—especially in the fintech space—remains a glaring oversight. Without proper regulation, consumers remain vulnerable, regardless of any other argument. IX.

Policy Recommendations for Effective Regulation The existing securities framework does not adequately regulate the activities commonly undertaken by finfluencers. Although they represent a relatively new category, many have amassed large followings, enabling them to influence both their audiences and the financial markets. Given the anticipated exponential rise in the number of such influencers in the coming 66 Rohit Sharma, Gaps in SEBI’s IA Regulations: Finfluencers in the Blind Spot, BUSINESS STANDARD (Dec. 2024), https://businessstandard.com/opinion/sebis-ia-regulations-and-the-finfluencer-challenge-2024.

67 Ashish Kumar, Loopholes in Influencer Marketing: The Vauld Case and Beyond, HINDUSTAN TIMES (Aug.

2024), https://www.hindustantimes.com/cryptocurrency-vauld-influencer-case. 68 Advertising Standards Council of India (ASCI), Guidelines for Virtual Digital Asset Promotions (Feb. 2025), https://www.ascionline.org/regulation-guidelines-for-crypto-promotions.html.

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months, it is imperative for SEBI and other regulatory authorities to take proactive measures. While finfluencers have contributed to financial and market awareness—particularly among the new generation, a balanced approach is required. Rather than outright prohibition, a structured regulatory framework could help create a mutually beneficial environment for both investors and influencers. A. Establishing an Independent Self-Regulatory Body

SEBI could consider fostering a self-regulatory organization for finfluencers, tasked with developing a code of conduct and setting content standards. Importantly, the establishment of a self-regulatory body for finfluencers would not mean operating entirely outside SEBI’s jurisdiction. Instead, such a body would function under SEBI’s oversight while ensuring greater industry participation in regulatory enforcement. B. SEBI’s Collaboration with Other Entities

Given that finfluencers operate primarily in the digital sphere, effective regulation must begin at the source—social media platforms and digital media. A collaborative effort between SEBI and these platforms could strengthen regulatory oversight and curb misleading financial advice. (i) Collaboration with Social Media Platforms Currently, social media platforms allow users to report false or misleading content in categories such as politics, health, and social issues. Expanding these policies to include financial and investment advisory content would enable SEBI’s framework to work alongside platform policies. A similar approach could be applied to financial content by automatically attaching disclaimers to hashtags like #investment, #financialplanning, #stockmarket, and #share, directing users to SEBI’s official website for verification.

Additionally, artificial intelligence tools such as RegTech could be leveraged to identify and flag misleading financial content. SEBI could also introduce a verification mechanism, granting a ‘Unique Verification Mark’ to registered investment advisers and research analysts on social media. This mark would help users differentiate between verified professionals and unregistered influencers, thereby encouraging more influencers to seek SEBI registration.

(ii) Collaboration with ASCI SEBI could also consider working with ASCI to regulate finfluencer disclosures and promotional activities. Although ASCI lacks the authority to penalize violations, it can alert SEBI to instances of non-compliance. A similar framework exists in the UK, wherein the Financial Conduct Authority collaborates with UK's Advertising Standards Authority to monitor financial endorsements. It could be of significant value for the SEBI to adopt this model for better disclosures and to ensure greater accountability of finfluencers.. C. Advertising Code for Finfluencers

Regulatory authorities across the globe have initiated guidelines in an effort to govern advertisements and prevent misleading promotions. In India, ASCI and the Department of Consumer Affairs have imposed restrictions on deceitful endorsements. Realizing the high-risk nature of virtual assets, ASCI released specific advertising guidelines that clearly stated crypto ad promotions should feature clear and conspicuous disclaimers. Equally, the National Stock Exchange of India has also introduced rules preventing stockbrokers from engaging with any celebrities or influencers with a following of over one million people in their promotions. A similar code of conduct should be followed with finfluencers: Management shall fully disclose affiliations, conflicts of interest, and any financial tie-ins regarding services they endorse.

Such transparency shall allow an investor to gauge the credibility of the financial advice. In making its recommendations, India should refer to New Zealand's Code of Professional Conduct for Financial Advice Services which requires licensing and stated connections. Alternatively, USA's Securities and Exchange Commission requires finfluencers to openly declare any compensation acquired in return for endorsements while Germany mandates that influencers clearly declare any financial aspects resulting from the promotions "A similar approach in India would ensure full transparency in financial endorsements and protection of investors from gapu claims". D. Need for Tailored Finfluencer Regulations

Therefore, given the increased level of financial content, regulation needs to balance the importance of financial literacy against combating misinformation. If they were to take a page from the Australian experience, India could allow finfluencers to sharing economic information that is fact-based while banning investment recommendations not authorized. Other protection

frameworks that SEBI must introduce would include preventing unregistered influencers from making investment views or endorsements in financial products. Further, SEBI could enable a simplified registration process for investment advisers and research analysts similar to that of Australia and the UK to inspire the most financial finfluencers to be registered with the regulator, ultimately being beneficial for the entire financial ecosystem in India. The need for SEBI to review its framework and study the regulatory environment around the practice followed in other countries to address existing gaps and provide better protection to Indian Investors across age is therefore clear. SEBI has already released a consultation paper regarding financial influencer regulation. In order to bridge the gap, the author presents a four-step solution.

The most critical issue is the need to take rapid action and address the complete lack of a registration mechanism for finfluencers. First, SEBI can introduce a registration framework for finfluencers that can, one, take into consideration preferences like a CFP certification and/or passing of an aptitude test and the like. Thus, there remains an assurance of minimum qualification to build up faith in the information provided for investors. Second, providing information about the affiliation of finfluencers with any company and potential conflict of interest would, through the mandatory disclosure requirements applicable, help the users in making more informed choices about quality investment advice. All compensation deals, such as sponsorships or affiliate marketing, should be clearly disclosed in a transparent manner so that viewers may weigh the integrity of the advice.

SEBI can also direct finfluencers to include risk disclosures with all content, properly defining the risk involved in investments. Thirdly, SEBI could facilitate content regulation, which would result in the online financial advice being credible. With collaboration among social media platforms, SEBI can work toward mitigation of misinformation and punishing finfluencers for giving financial guidance performed in personal nature. This could include the creation of reporting tools and content review teams to help keep the integrity of financial advice intact. Lastly, SEBI is required to create harnesses in a collaboration with international regulators to exchange best practices used and technologies for improved oversight. This will allow SEBI

to monitor breaches with effectiveness and with that assured that accurate financial information is disseminated through modern supervisory technologies. IX.

Conclusion As India stepped into maturity in the digital age, SEBI had to take up the mantle of financial regulation and ensure transparency. Finfluencers exploded onto the scene, particularly during COVID: a means of democratizing financial knowledge but also a Pandora's box of risk. Hence, it is but imperative that SEBI remain ever so proactive in protecting the integrity of India's financial markets. Finfluencers per se might have simplified financially deeply elusive subjects, the downside is these may also bring along risks for retail investors and get them away from traditional regular advisors to regulated ones. The risk here for Indian investors poses a potential danger more so for lower financial literacy levels.

These may consist of misleading content, stock manipulation, and conflicts of interest, resulting in losses for investors because current regulations permit finfluencers to operate with far less scrutiny than do regulated advisors. SEBI's actions seeking to quell illegal practices in the form of 'pump and dump' schemes may appear as a commitment to protecting investors. Such actions along with the frameworks and guidelines being proposed are ways to help ensure finfluencers are being watched. Nevertheless, SEBI will have to continue to play catch-up with new-age marketing tactics and work along with other regulators so it stays ahead. To conclude, SEBI's regulatory endeavours are requisite for the protection of Indian investors and the integrity of the very financial market.

In conjunction with educational endeavors, it would be beneficial for SEBI to work in the sphere of investor protection, which in turn will build the resilience of the Indian financial landscape in this fast-changing era.

BIBLIOGRAPHY

Statutes (Rules and Regulations)

1. Investment Advisers Regulation, 2013, Gazette of India, Part III, Section 4, on January

21, 2013.

2. SEBI Research Analysts Regulation, 2014, Part III, Section 4, Regulation 7, dated

September 1, 2014.

3. Section 12A of the Securities and Exchange Board of India Act, 1992.

Cases

1. State of Maharashtra v. Indian Hotel & Restaurants Ass’n, (2013) 8 S.C.C. 519.

2. Olga Tellis v. Bombay Municipal Corp., (1985) 3 S.C.C. 545.

3. Australian Securities and Investments Commission v. Scholz (No 2), [2022] FCA 1542.

Journal Articles

1. Aryaman Dubey, The Impact of Finfluencers on Corporate Governance in India:

Comparative Analysis of Company Law Perspectives and the Need for SEBI Regulation, 4(1) Indian J. Integrated Res. L. (2024).

2. Krithi D. Ramaswamy, Finfluencers in India: New Paradigms of Financial Trust and

Authority, 1(1) Soc. Media & Soc'y Proc., 133 (2023).

3. Sania Lopes & Tanvi Chheda, India’s Influencers Snag and the Road Ahead, 4(1) Legal

Lock J. (2024).

4. Anjali Pathak, Free Speech and Professional Responsibility: The Case for Reasonable

Restrictions under Article 19, 15 Indian Const. L.J. 213 (2023).

5. Uddhav Vaishnaw & Prakhar Khandal, SEBI’s Oversight Gap: Fin-Influencers and the

Need for Regulation, Indian Rev. Corp. & Com. L. (May 2, 2023).

6. Anupama Reddy & Isha Sharma, Likes to Licenses: Analyzing SEBI’s Recent Action

Against Finfluencers, Indian Rev. Corp. & Com. L. (Mar. 23, 2024).

7. Parul Anand, Finfluencers Need To Fall Under the Regulatory Lens, Indian Rev. Corp.

& Com. L. (Sep. 1, 2023).

8. Akshaya Kamalnath, Finfluencers and Other Tech Disruptions to Corporate Law:

Insights from South Korea and India, ECGI Working Paper Series in Law, No. 779 (2024).

9. Sara Sundaram, Somesh Lund & Soham Bamane, From Likes to Licenses: Regulating

Finfluencers Amidst Stricter Norms, IndiaCorpLaw (Aug. 29, 2024).

10. Prachi Pandya & Shaili Dhulia, FinFluencers—From the Lens of SEBI, SCC Times

(Aug. 29, 2023).

11. Gaargi Singh, Power of Influence: Regulating the Financial Influencers in India, 2023

SCC OnLine Blog OpEd 124. Online Material

1. India's SEBI Bans Six Individuals Over Misleading Investment Advice, REUTERS

(Feb. 2025), https://www.reuters.com/article/us-india-sebi-idUSKBN2A10X9.

2. Aditya Kalra, India's SEBI Seeks Greater Access to Social Media Records, REUTERS

(Feb. 13, 2025), https://www.reuters.com/world/india/indias-sebi-seeks-greater-accesssocial-media-records-say-source-memo-2025-02-13.

3. Madhabi Puri Buch, SEBI Chairperson’s Comments on Regulating Financial

Influencers,

ECONOMIC

TIMES

(Jan. 2024), https://economictimes.indiatimes.com/news/regulation/sebi-chairperson-commentson-finfluencers/article/12345.cms.

4. Securities and Exchange Board of India, SEBI Cracks Down on Finfluencers Selling

Stock Tips in the Name of Education, The Economic Times, Jan. 30, 2025,

https://m.economictimes.com/markets/stocks/news/sebi-cracks-down-on-finfluencersselling-stock-tips-in-the-name-of-education/articleshow/117723874.cms.

5. Department of Consumer Affairs, Ministry of Consumer Affairs, Food & Public

Distribution, Government of India, Guidelines for Prevention of Misleading Advertisements and Endorsements, https://consumeraffairs.nic.in/sites/default/files/fileuploads/Guidelines%20for%20Prevention%20of%20Misleading%20Advertisements %20and%20Endorsements.pdf.

6. France

Targets Finfluencers With Responsible Certificate, FinanceFeeds, https://www.financefeeds.com.

7. France Passes Law to Regulate Paid Influencers, Combat Fraud, ABC News,

https://www.abcnews.com.

8. Finfluencers Face Prosecution for Misleading Investment Advice, Says EU Watchdog,

Euronews, https://www.euronews.com.

9. Fox Mandal & Associates, Cutting Ties with Finfluencers: SEBI Distinguishes Between

Education & Advice, (Feb. 10, 2025), https://www.foxmandal.in/News/cutting-tieswith-finfluencers-sebi-distinguishes-between-education-advice.

10. Mondaq, Securities Law Update: Clarification on Intermediaries and Other Associates

Persons Regulated by

SEBI,

(Feb. 07, 2025), https://www.mondaq.com/india/securities/1580788/securities-law-update-%7Cclarification-on-intermediaries-and-other-associates-persons-regulated-by-sebi.

11. Siddharth Venkataramakrishnan, India's Stock Market Has an Influencer Problem,

Financial Times, Feb. 20, 2025, https://www.ft.com/content/3be3c45b-6a05-4d1cbf21-42d0d980d22c.