FinTechTeaching or Profiteering: The lacking Legal landscape around Fin-Fluencers in India

March 31, 20230


Investing in financial instruments or stock exchanges in India has mostly been a practice of a niche group of business savvy and cash rich individuals in India with not many notable outliers. Investing in anything besides Gold was seen as risky and overcomplicated.

The Covid-19 pandemic shook these archaic notions in many as job markets saw layoffs, decrease in packages and all materialized assets started to come to be seen as potential contaminants. The perspective towards investing in securities market had changed but the masses still lacked understanding over basic trading concepts. Thus, came the rise of Fin-Fluencers in India.

Although the etymology of the word might imply individuals akin to Instagram influencers, the term “Fin-Fluencers” has become a universal way to describe all individuals involved in making any kind of content about investment markets, trading techniques and even analysis of the past trends.

These Fin-Fluencers usually publish short/long format videos on platforms like YouTube and Instagram with the most popular videos having up to 15-20 million views. Although this might seem like a happy story there is a high risk attached to letting such wide reach financial advice be unregulated.

Very recently the Securities and Exchange Board of India (“SEBI”) banned actor Arshad Warsi and his wife Maria Goretti and several others who were involved in a company known as Sadhna broadcast from personally trading in the securities market as they were allegedly caught being involved in an online ‘pump-and-dump’ scheme.


Pump-and-dump schemes are an infamous and common scam that has been carried out in various ways in nearly all national and international stock exchanges on both miniscule as well as massive scales. The actors involved, the duration and the scale might vary but the basic modus-operandi of all such schemes typically involves the spreading of false or misleading information to create a buying frenzy that will “pump” up the price of a stock and then “dump” shares of the stock by selling their own shares at the inflated price.

Those who are carrying out the scam typically targets worthless or penny stocks which are bought at a very low price. Modern scamsters then use various ways of online marketing and peddling fake tips to increase interest in the stock, also termed as creating fake hype.

Once enough people start buying into the hype the price of the targeted stock balloons at which point these scamsters can cash in and sell their shares to create massive profits (dumping). Naturally once the scamsters stop hyping the stock it quickly looses all its value and the rest of the investors lose all their investments as the stock crashes.

The Fin-Fluencers with the following of even 2-3 lakh people can induce a lot of damage to the retail investors by carrying out such pump-and-dump schemes. This is exactly what happened in the Arshad Warsi case where it has been alleged that there was price manipulation and offloading of shares by certain entities in the scrip of television channel Sadhna Broadcast.

The complaints alleged that misleading YouTube videos with false content about the company were uploaded to lure investors. Following this, the regulator conducted an examination during April-September 2022 and found a spurt in the price and volume of scrip of Sadhna between April and mid-July 2022. During the second-half of July 2022, false and misleading videos about Sadhna were uploaded on two YouTube channels — “The Advisor” and “Moneywise”.

These YouTube videos peddled false and misleading news to recommend that investors should buy the Sadhna stock for extraordinary profits, SEBI said in its interim order. Subsequent to the release of the misleading YouTube videos, there was an increase in the price and trading volume of the Sadhna scrip.


All matters relating to securities are regulated by SEBI, under Securities Contracts (Regulations) Act, 1956.

Section 2 (h) Securities Contracts (Regulations) Act, 1956 defines securities as:

(h) “securities” include— (i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

The SEBI mandates that those involved in acting on behalf of issues three main licenses to those individuals or entities who wish to act as on behalf of principle investors to trade in the stock market. The main regulations are the –

1. SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992

2. The SEBI (Investment Advisers) Regulations, 2013

Regulation 2 (l) of the SEBI IA Regulations defines Investment Advice as under:

“investment advice” means advice relating to investing in, purchasing, selling or otherwise dealing  in  securities or investment products, and advice on investment portfolio containing securities or  investment products, whether written, oral or through any other means of communication for the  benefit of the client and shall include financial planning

Provided that, investment advice given through newspaper, magazines, any electronic or broadcasting  or telecommunications medium, which is widely available to the public shall not be considered as  investment advice for the purpose of these regulations;”

3. The SEBI (Research Analyst) Regulations, 2014

Although the specific scope of function under all three regulations is different the broad scope of work of all three remains the same, that being, analysing the markets and either providing data or advise on how to invest or to invest directly on behalf of the principle investor.

Therefore, it is clear that SEBI has made it mandatory for obtaining these licenses to mitigate frauds and investing scams which are a phenomenon amongst large fund managers. Besides these the SEBI has also taken under ambit responsibilities of intermediary platforms on which securities related activities and transactions take place vide the SEBI (Intermediaries) Regulations, 2008.

Regulation 15 of Intermediary Regulation, 2008 defines “Investment Advice” as – 

“(1) An intermediary, its directors, officers, employees or key management personnel shall not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of its interest, direct or indirect, including its long or short position in the said security has been made, while rendering such advice.

These Regulations stipulate a stern code of conduct to be maintained by the Intermediaries stipulating the intermediary platform and its directors, managers, and employees to continuously abide by the code of conduct specified in Schedule III of the Reg.”

To oversee that this Code is abided with SEBI also mandates the setting up of a board to oversee intermediaries which has to register and regulate the working of stock brokers, sub-brokers, share transfer agents and all other such intermediaries who may be associated with securities markets in any manner.

It is interesting to note however that the SEBI Investment Advice Regulations provide an exemption under Regulation 4 to certain class of people which is likely to be taken umbrage of as a defence by Fin-Fluencers in the future.

This Regulation stipulates that any person who gives general comments in good faith in regard trends in the financial or securities market or the economic situation where such comments do not specify any particular securities or investment product shall be exempt from these Regulations.


The problem of people or entities with huge number of followers is that, they are manipulating stock markets in most countries of the world. Recently in 2021 in the US the stock of GameStop (traded as GME) was blown up by a group of small investors active on Reddit and convincing a larger portion of retail investors to buy and hold the stock. Similarly actor Arshad Warsi among other was found guilty by SEBI of manipulating stock markets using YouTube channels to carry out pump-and-dump schemes.

United States of America

The United States’ premier governmental body which regulates capital markets and exchange boards is the Securities and Exchange Commission (“SEC”) has fined multiple influencers who were involved in a fraud scheme in which they used the social media platforms Twitter and Discord to manipulate exchange-traded stocks

SEC has issued a statement on celebrities who are popularizing digital campaigns that “Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion”

The SEC has also issued a bulletin advising investors to avoid social media and investment fraud.

European Union

EU has launched REGULATION (EU) No 596/2014 on market abuse (market abuse regulation) which regulates ‘Investment Recommendations’ (“IR”). Article 3 sub-clause 1 (34) defines IR as “information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public.”

The European Securities and Markets Authority (ESMA) clarifies what investment recommendations are, how they can be posted on social media platforms, and the consequences of possible violations of the EU Market Abuse Regulation.


Recently the trend of Fin-Fluencers has boomed exponentially in Singapore due to TikTok. The Monetary Authority of Singapore (“MAS”) released the Guidelines on Provision of Digital Advisory Services under the Securities And Futures Act and the Financial Advisers Act defines ‘digital adviser’ as “a person who provides digital advisory services”.

In response to a query raised by, MAS third parties – including social media influencers – may solicit customers in Singapore on behalf of providers of regulated payment services such as digital payment tokens (DPTs), this must be done within the existing rule book.

MAS further stated that unlicensed entities that solicit customers in Singapore may be placed on the MAS investor alert list and investigated for breaches of the Payment Services Act.


In China the People’s Bank of China, along with seven other regulatory bodies have released consultation on the online marketing of financial products, titled “Administration of Online Marketing of Financial Products” which laid out detailed regulatory requirements for online marketing of financial products through all online channels including social media.


In Australia, the Australian Securities and Investments Commission (“ASIC”), which is the premier agency for regulating the securities market, has released an Information Sheet titled Discussing financial products and services online” for those use social media and online portals to discuss financial products and services.

According to the Information Sheet that the existing financial services laws apply to such Fin-Fluencers and that it is their responsibility to ensure that any content you post complies with the law.

Although, countries and their regulatory bodies have begun recognizing the need to extend investment advice regulations on online investment advising, the focus is still on the Fin-Fluences and little progress is made on the intermediaries which give these Fin-Fluencers a platform to reach the general public.


It is clear that world over it has been recognized that there is a growing trend of people investing their money on the basis of tips and practices that are trending on social media. This is a natural consequence of the decreasing gap social media and professional/educational environments; however, it still requires minimal regulations which at least bring malicious Fin-Fluencers under the ambit of the law.

As of now, owing to a dearth of guidelines and rules, influencers tend to furnish their followers and subscribers with a set of financial recommendations on many social media channels without a license. Santosh Kumar Mohanty, a full-time member of the Securities and Exchange Board of India, has already agreed that SEBI needs to work on new guidelines for those providing financial advice on social media platforms.

– Team AMLEGALS, assisted by Mr. Jason James (Intern)

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