• November 24, 2023

Cracking down on finfluencers: Emerging technologies could force SEBI to provide less leeway and become stricter

Cracking down on finfluencers: Emerging technologies could force SEBI to provide less leeway and become stricter

Sebi, on multiple occasions, has recognised the finfluencer community’s contribution to financial literacy, given the reach and influence that social media tends to hold over the general public.

A lot has been said about the regulation of finfluencers in India. This niche of social media influencers has been under the market regulator’s scanner, which has, time and again, taken a firm stance against the misguided expectations set by them. Apart from proposing regulations to govern them, which include a plausible restriction on regulated intermediaries from tying up with unregistered finfluencers, the Securities and Exchange Board of India (Sebi) has also been actively taking enforcement action against finfluencers for making misleading claims and for offering advice without a license.

A case in point is Sebi’s recent order against Mohammad Nasiruddin Ansari, a Hyderabad-based finfluencer and owner of the proprietorship firm ‘Baap of Chart’, in which Sebi directed him to disgorge an amount of Rs 17.2 crores for carrying out unregistered and fraudulent investment advisory activities. Sebi observed that Ansari had been providing investment advice to students under the pretext of educational courses or workshops, evidently, in exchange for certain fees.

Sebi’s investigation revealed that these courses and workshops were being offered on Bunch, a content marketplace, which facilitated collection of fees from retail investors and granted them access to classes. However, contrary to the nomenclature used, Ansari was found to be providing multiple trading strategies and recommendations with guaranteed returns through such courses. Oddly enough, for certain courses, Ansari also went as far as to assert that he was willing to put it in writing that his strategies would result in profits to his students and that the fees would be refunded in case of any losses suffered. Moreover, the investors who signed up for such courses were also added on private chat groups in which specific recommendations were frequently shared. It was also noted that Ansari provided personalised guidance for live market transactions. As a finfluencer with a significant follower base across social media platforms, Ansari was observed to have posted several trading strategies, along with redirect links, to entice investors to subscribe to his so-called educational courses or workshops, by claiming that they would generate profits upon following his strategies.


Sebi, in its interim ex-parte order, observed that all these activities amount to unregistered investment advisory activities, considering the unscrupulous nature of the entire operation. Moreover, other persons who had directly or indirectly received fees collected from investors, held directorships in Golden Syndicate Ventures Pvt. Ltd. (GSVPL), an entity in which Ansari held 25% shareholding. They were also found to be complicit in providing unauthorised advisory activities to investors. Investment advice, which can only be provided by Sebi-registered investment advisors, was blatantly doled out in the form of ‘educational content’ with the promise of guaranteed profits. While Sebi has been supportive of finfluencers’ endeavours to improve financial literacy through well-researched  content, clear attempts to bypass regulatory requirements call for strict action from the regulator, as seen in this matter.


Ansari was also found to have fraudulently lured investors to deal in the securities market by promising profitable outcomes if his strategies are followed. It is interesting to note that Ansari, who presented himself as a ‘stock market wiz’ on various platforms, using rather dubious theatrics and showmanship, had, in fact, lost over `2 crore over a span of two years in his personal capacity, without making any profits. In this context, Ansari’s clearly deceptive claims of guaranteed profits were also seen as false and misleading, in violation of the Sebi (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.


Another crucial aspect to consider is Sebi’s take on the disclaimers, which were used to inform all the existing and prospective students of the unregistered status of the noticees. Disclaimers are a widely used tool in the financial services industry to highlight key information and potential risks to users. While the disclaimers, in Ansari’s case, expressly stated that all information provided were for educational purposes, however, Sebi noted that such disclaimers were merely the noticees’ attempts to absolve themselves of any liability by warning the investors of the nature of service that they had availed. Shifting the onus of exercising caution on the investors in relation to unregistered activities, when the activity, in itself, is unauthorised and cannot be carried out without requisite Sebi-registration, is close to absurd and cannot be permitted. From that perspective, Sebi’s observation is likely to serve as a valuable lesson for market players while resorting to such disclaimers in the future.


Sebi, on multiple occasions, has recognised the finfluencer community’s contribution to financial literacy, given the reach and influence that social media tends to hold over the general public. However, in light of the far-reaching implications of misleading claims and unregistered investment advisory services on market integrity, Sebi typically has to step in when a finfluencer’s attempts to educate investors crosses over into investment advice. As seen in Ansari’s case, this distinction perhaps lies in the mannerisms and language used by the finfluencers in question, and whether a combination of these factors can be viewed as an ‘inducement’ to invest. For instance, suggesting trading strategies while promising near-certain profits are an obvious indicator of investment advice. Finfluencers who make assertions of a profitable track record, especially one unsupported by their individual trading records, are likely to face graver charges of fraudulent and deceptive practices. The facts of this case represent the blurring of lines between financial education and investment advice that Sebi intends to tackle.


Sebi’s recent actions pertaining to finfluencers, including an order passed in June 2023 against another influencer, PR Sundar, for engaging in unregistered investment advisory services, is indicative of the market regulator’s proactiveness in keeping up with the evolving landscape of imparting financial literacy. While the proposed regulations to govern finfluencers will be a stepping stone in putting an end to such activities, Sebi is likely to continue encountering several challenges. Keeping up with emerging technology, cross-border reach of finfluencers and innovative marketing strategies, that are aimed at bypassing regulations, will prove to be a constant challenge, one that might force the regulator to provide less leeway and become stricter with time.

Sandeep Parekh, managing partner, Finsec Law Advisors, penned this piece for Financial Express. Co-authored with Rashmi Birmole and Navneeta Shankar, associates, Finsec Law Advisors.

Views are personal and do not represent the stand of this publication.

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