ABSTRACT
“The rise in the popularity of social media platforms has led to a change in the way that retail investors get their information regarding securities and financial markets. The use of platforms like YouTube, Instagram, X, Telegram and WhatsApp has allowed the emergence of financial influencers, popularly referred to as “finfluencers”, to communicate to a large audience with their financial content. Although such content helps in raising the financial awareness levels of investors, the paid promotions give cause for worry because the influencers promote the securities, investment products or financial services in exchange for payments that they have not disclosed. In order to deal with such issues, SEBI has issued regulations that include the banning of unregistered investment advice, advertisements and restrictions on associations between regulated and unregistered individuals. The article analyses the current Indian regulations on securities promotion for payments, problems faced while enforcing such regulations, and possible ways by which these can be made more effective without unduly constraining legitimate financial education.”
KEYWORDS
Finfluencers, SEBI, Social Media, Securities Regulation, Retail Investors, Investment Advice, Paid Promotions
INTRODUCTION
Social media is one of the key platforms where financial information can be found by retail investors. Short clips, posts, live-streams and even group messages can break down complicated financial issues into layman’s terms so that investors get market information in real time. Yet the very ease of social media poses threats because the content is driven by commercial interests, yet presented to be an unbiased opinion.
This issue has recently been accentuated by the appearance of “finfluencers”. SEBI has noted that finfluencers can affect the financial choices of their followers, while some unregistered individuals are promoting financial instruments or securities in exchange for a financial benefit. The problem does not lie so much in whether the message is financially correct, but whether the audience knows about the personal benefit of the one who sends it.
For individual investors, it will be very hard for them to know where financial education ends and investment promotion begins. It is an interesting question from a regulatory perspective: how should Indian securities law regulate securities promotions paid through social media while allowing financial education and free speech?
THE RISE OF FINFLUENCERS AND PAID PROMOTIONS
Historically, communications in the securities market have been conducted via regulated intermediaries, newspapers, television, and research reports. The use of social media has altered this dynamic considerably. An unregistered individual can become popular on social media and impact investment decisions based on content that does not seem to be commercially driven at all.
This does not always make it apparent that the content is commercial in nature. The video being posted by an individual might appear to be his own personal opinion, when the individual might have been paid a lump sum amount, commissions, or something else for posting that video by the broker, issuer, or financial service provider. This creates an information asymmetry because the influencer knows about the financial arrangement while the viewer may not.
SEBI has been cautioning the investors to be careful of the advice offered by unauthorized persons in the social networking media. It has become increasingly difficult to deal with this issue because social media advertisements have now become more professionalized.
EXISTING REGULATORY FRAMEWORK IN INDIA
SEBI is the key regulator in this regard and it derives its powers mainly under the provisions of the Securities and Exchange Board of India Act, 1992. The regulations relating to Investment Advisers and Research Analysts are highly significant in this context. It must be noted that no person can become an investment advisor without holding the SEBI registration and SEBI has warned the investors about seeking advice from any unregistered person.
Another regulation applicable in case of recommendation or research of securities by an individual is SEBI (Research Analysts) Regulations, 2014. The regulatory framework distinguishes regulated research and advice from ordinary financial commentary.
The Advertisement Code for Investment Advisers and Research Analysts issued by SEBI in 2023 has added another layer to the regulation of promotional communications. Significantly, the advertisement code of conduct is applicable to the electronic means of communication and the social media sites. Social media is treated as an advertising platform since the information may be communicated in the form of reel, post, or video.
One of the significant developments was made by SEBI in 2024 with the introduction of restrictions on associations of regulated persons and persons engaged in prohibited activities. The framework does not allow any kind of direct or indirect association between the regulated person and the agent of such person, where there is no registration or permission to provide securities related advice/recommendations. he measure directly addresses the commercial ecosystem connecting regulated intermediaries with unregistered finfluencers.
The SEBI 2026 circular on social-media disclosure is yet another significant development. Effective May 1, 2026, SEBI-regulated entities and their agents need to make clear disclosures of their registered name and SEBI registration number in relation to any social-media content, thus making it easier to identify regulated participants from unregistered persons.
KEY REGULATORY CHALLENGES
However, even with these precautions, paid securities promotion still poses challenges for regulation.
Firstly, not all disclaimers provide adequate protection. A disclaimer indicating that information is provided “for educational purposes only” does not guarantee protection of the investor from an influence of a person who is at the same time being paid to promote a specific stock or service. Financial motivation might have a significant impact on the reliability of advice.
Secondly, it is unclear where the line is drawn between education and advice. Education about basic financial terms like mutual funds, stocks, or diversification does not require registration per se. Yet constant encouragement of buyers to buy, sell, or hold a specific security can be a powerful influence on investors’ decisions. The challenge is therefore to regulate the substance and commercial context of communications rather than merely the platform on which they appear.
Thirdly, the enforcement of such regulations is very tough due to the dynamic and decentralised nature of social-media communications. One promotional video may be removed, posted again, or shared via multiple channels. The presence of anonymous profiles and closed chat rooms only increases the complexity of the problem.
Fourthly, the current regulatory scheme works mostly through regulated intermediaries. It prevents SEBI-regulated companies from interacting with some unregistered persons due to restrictions on associations. However, the existing regulation does not eliminate all forms of independent paid communication. For example, one company or person may try to structure their relationship in such a way as to avoid clear regulatory classification.
The regulatory initiatives of SEBI itself show how serious this issue is. As an example, in one case of enforcement in 2026, SEBI considered a post in social media where only the successful calls were shown, and this was considered as advertising since such selective presentation may affect investors’ perception. This illustrates how apparently informational social-media content can become promotional communication.
SUGGESTIONS FOR STRENGTHENING REGULATION
The objective should not be to ban financial information on social media. The focus of regulations should be on transparency, accountability, and influence.
Firstly, SEBI should think about having a uniform rule for paid promotion of securities. Words such as “Paid Promotion”, “Sponsored Securities Content” or “Financial Relationship Disclosed” should be displayed in a prominent place instead of being concealed in the caption or hashtags.
Secondly, there should be documentation of paid securities promotions for a certain time by platforms and regulated entities themselves. It will help SEBI to trace repeat offenders and misleading people.
Thirdly, there must be a more clear demarcation between financial education and securities recommendations. While educational materials must be available, personalized or repeated buy/sell recommendations for commercial gains must be subject to stricter regulations.
Fourthly, the regulated intermediary needs to have more responsibilities. When any broker, adviser, or any other regulated intermediary pays or incentivizes an influencer, the regulated intermediary must undertake due diligence and comply with SEBI’s regulation with respect to advertising and behavior.
Lastly, investor education needs to continue playing a key role. SEBI has always recommended to investors that they check whether individuals providing investment advice or research are properly registered. Similarly, retail investors need to be encouraged to find out whether the financial influencer is sponsored, registered, and what his/her financial interests are.
CONCLUSION
Promotion of securities paid for by the promoter companies in social media is an emerging trend of securities market communications that was not intended to be controlled under the existing regulatory framework. While finfluencers could help raise awareness about finance matters, hidden commercial relationships may make independent advice seem like an advertisement with potential influence on retail investors’ decisions.
SEBI has already done much regulating investment advisers and research analysts, requiring advertisements, limiting associations with unregistered people, and finally mandating identification of regulated entities in social media. However, regulatory practice still needs to adapt to the changing realities of the digital world.
The appropriate approach is therefore not a blanket prohibition on finfluencer activity. Instead, India should adopt a transparency-based and risk-sensitive framework that makes commercial relationships visible, distinguishes education from recommendations and holds both influencers and regulated entities accountable for misleading promotions. Protecting retail investors ultimately depends not on preventing financial communication, but on ensuring that investors can understand who is speaking, why they are speaking, and who stands to benefit from their decision.
“PRIME LEGAL is a National Award-winning law firm with over two decades of experience
across diverse legal sectors. We are dedicated to setting the standard for legal excellence in
civil, criminal, and family law.”
WRITTEN BY: KHWAISH SACHDEVA
