Finfluencers and SEBI: Looking for the Right Regulatory Model

Finfluencers, that is, financial influencers on YouTube, Telegram, Instagram and other social media platforms, have become a major source of investment information for the Indian retail investor. Many of them are not registered with SEBI as either investment advisers or research analysts. SEBI has, in the recent past, passed orders against several well-known finfluencers including Mohammad Nasiruddin Ansari (Baap of Chart), P.R. Sundar and Asmita Patel. The orders show that the harm caused is not small. Crores of rupees have been collected from unsuspecting investors. The existing legal framework consists primarily of the SEBI Act, 1992, the SEBI (Investment Advisers) Regulations, 2013, the SEBI (Research Analysts) Regulations, 2014 and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. None of these were drafted with social media in mind. SEBI has, by way of a Consultation Paper of August 2023, a Circular dated 13 May 2024 and amendments to the IA Regulations in 2024, taken some steps. But these steps are only the beginning. The paper examines four possible regulatory models for India: (i) a tiered registration framework based on the type of activity; (ii) co-regulation with social media platforms; (iii) recognition of a Self-Regulatory Organisation (SRO) for finfluencers; and (iv) a statutory private right of action with class-action features. The paper concludes that none of these alternatives is sufficient by itself, and that an effective Indian model will need to combine elements of all four. The methodology is doctrinal and comparative, with reference to the regulatory positions in the United States, United Kingdom and the European Union.