Sebi raps finfluencers, 8,890 misleading securities market posts flagged for legal action

In June 2024, SEBI introduced a regulatory framework to prevent entities from collaborating with finfluencers.

Capital market regulator Sebi has red flagged 8,890 instances of unlawful or misleading content across social media, and notified leading platforms to take measures against the accounts behind the false claims.

The regulator has officially notified relevant platforms and apps, including Facebook, Instagram, Telegram, YouTube etc., seeking stringent legal measures against those propagating false claims around stock market.

“As of 17th July 2024, SEBI has informed 8,890 unlawful/misleading social media content relating to securities market to the concerned social media platform providers for legal action,” Rajya Sabha was informed on July 30.

Rising Influence 

Over the past year, Sebi has consistently intervened to curb the spread of illegal stock advice or misleading content on finance by financial influencers, or finfluencers.

Many of these self-claimed influencers have been providing stock tips and investment advice without proper registration, putting investors at risk.

Instances include false promise of guaranteed returns, technical jargon to confuse investors, and misleading testimonials in social media posts and advertisements, Sebi has noted.

This comes at a time when the retail investor's participation equities is on the rise, with total number of Demat accounts jumping to 15.1 crore in March 2024, per data from domestic brokerage house Motilal Oswal Financial Services.

The proliferation of social media influencers has seeped into the Banking, Financial Services and Insurance (BFSI) sector too. According to the 2024 influencer marketing report by Kofluence, the BFSI sector has a significant share of nearly 15.4 percent in India's influencer marketing space.

A separate report by The Advertising Standards Council of India (ASCI). highlights that 79% of consumers on the internet trust social media influencers, with 30% have total trust in them.

SEBI Acts Tough 

Amid growing concerns over the misuse of social media for financial advice, Sebi, in a draft circular dated May 27, had mandated investment advisors (IA) to disclose details of their social media presence, including accounts, pages, and channels, twice a year.

Currently, the Investment Advisors Administration and Supervisory Body (IAASB) monitors this activity.

The capital market regulator has now introduced a regulatory framework to prevent entities from collaborating with finfluencers. Under these new rules, registered entities cannot associate with unregistered financial promoters on social media platforms to make promotional claims or offer financial advice.

Entities regulated by Sebi, and their agents, are now prohibited from associating directly or indirectly with any individual or entity that offers financial advice or makes performance claims without the regulator's permission. The restrictions include any form of monetary transactions, client referrals, or IT system interactions, SEBI said in a press release dated 27 June 2024.

In some cases, the market regulator has ordered outright bans on social media influencers for their roles in 'pump and dump' schemes and providing unauthorized advice.

Influencers like P R Sundar, Syyed Shujauddin, Ruchit Gupta, Mohammad Nasiruddin Ansari (Baap of Charts), and Ravindra Balu Bharti have been barred from trading and fined heavily for their actions.