The Securities and Exchange Board of India (Sebi) has put forward a significant proposal aimed at cleaning up the often-murky world of financial advice on social media. In a move designed to protect investors, the market regulator wants to make it compulsory for all entities it regulates to clearly display their names and registration numbers on their social media profiles and within every post they make.
Combating Fraud and Misinformation
This initiative, detailed in a consultation paper released on Friday, seeks to create a clear distinction between content shared by Sebi-regulated bodies—such as mutual funds, brokers, and distributors—and that posted by unregistered individuals or organizations. The regulator explicitly noted that fraudsters and unregistered persons have been perpetrating frauds in the securities market through misleading and manipulative social media content.
While the new norms will make it easier to identify legitimate, registered entities, experts point out that the responsibility for verification still largely falls on the investor. Vishal Bedse, an investment advisor at ICICI Investment Management Company, stated, "This move would curb misleading posts by fraudsters and imposters, but the onus of verification is left to the investor watching the content on social media."
Strict Content Guidelines for Regulated Entities
As part of its broader crackdown, Sebi's proposal also includes a list of prohibited activities for regulated entities. They will be barred from:
- Publishing any content that contains statements which directly or indirectly mislead an investor or exploit their lack of knowledge.
- Making promises of risk-free or assured returns in their social media communications.
- Referring to their own past performance unless explicitly permitted by Sebi regulations.
- Using the official Sebi logo or making any reference to a Sebi office or officer in their posts.
Furthermore, regulated entities are no longer permitted to associate with unregulated advisors on social media, a practice that has often lent false credibility to bad actors.
The Growing Influence of 'Finfluencers'
The urgency of Sebi's action is underscored by its own recent survey data. A comprehensive study conducted by Kantar across more than 90,000 households revealed a dramatic shift in how retail investors make decisions.
The survey found that a staggering 62% of retail investors now rely on recommendations from finfluencers, or financial influencers, bypassing traditional advisory channels. This highlights a significant trust gap in the conventional financial system. The perceived credibility of these online personalities is exceptionally high, with 93% of their followers finding them moderately to highly credible.
Sebi's efforts to police this space are already substantial. Sebi chairman Tuhin Kanta Pandey revealed that the regulator has escalated more than 100,000 instances of unlawful or misleading online content to major platform providers like Meta, Google, Telegram, and X for appropriate action. The regulator has not yet specified a deadline for stakeholders to provide feedback on this new proposal.
