power of influence

In today's ever-evolving world, social media along with technological advancement is experiencing a remarkable expansion. With each new development comes a wealth of opportunities for personal and professional growth. The outbreak of COVID-19 and the restrictions that came with it has given rise to a new trend, particularly among the youth in the country, known as the social media influencers. They have the ability to influence the lifestyle, opinions, behaviours and knowledge of their followers through their content. One such group of influencers that has quite become popular throughout the country are the financial influencers or more commonly known as “finfluencers ”. These finfluencers are known to create content that significantly impacts the financial decisions or investment strategies of their audience.

Finance has always been a complicated subject to understand, involving several confusing terms and practices. Unfortunately, despite its significance in everyday life, finance as a subject is often never taught in the schools which contributed to the high financial illiteracy rate in India. Only 27% of Indian adults meet the minimum level of financial literacy as defined by the Reserve Bank of India.1 However, finfluencers have played an impactful role in spreading financial awareness and motivating investors to actively participate in finance market. Affordable smartphones with cheap data plans and user-friendly investing apps have further paved the way for finfluencers to reach a wider and diverse set of audience. Their content ranges from “how to start investing” to “how to earn crores of rupees in 10 years” including what are best strategies and stock options for maximum returns. But what real ability do they have to influence such crucial life-changing decisions for others?

Existing regulatory framework for investment advisers

Personal finance is unique to everyone and there is no universal formula that suits every investor. The Securities and Exchange Board of India (SEBI) felt the need to regulate the working of financial advisory system and hence came up with the SEBI (Investment Advisers) Regulations, 2013 (Investment Adviser Regulations) which mandated the registration of investment advisers. A registered investment adviser (RIA) is bound by several compliances under the regulations that includes conducting a risk profiling of the investors to check the suitability of the investment advice given to them.2 Moreover, RIAs are finance experts with professional qualifications and an experience of at least five years in activities relating to advice in financial products or securities or fund or asset or portfolio management.3 Given such guidelines, one might think that the Investment Adviser Regulations is a good step towards providing better and secure financial advice to the investors. However, the number of registered investment advisers in India stands at a mere 13314 which is a disappointingly low figure and there can be numerous reasons accountable for this. To begin with, RIAs are required to pay an upfront cost to get their licence. They are required to comply with frequently changing rules and regulations issued by the SEBI. For instance, in April 2023, SEBI released the Advertisement Code for the investment advisers that barred them from using superlative terms such as “best” and “leading” in their advertising.5 The Advertisement Code also made it mandatory for the RIAs to obtain prior approval from SEBI for each advertisement they publish. Hence, the burden of rigid compliances and excessive approvals is preventing prospective advisers from joining the field, as well as hindering existing investment advisers from expanding their operations. Furthermore, no investor would want to pay for financial advice when there is a plethora of finance advisory content available online for free.

In contrast, the Investment Adviser Regulations exempts any advice given through any electronic or broadcasting medium under its purview. As a result, social media finfluencers have uncontrolled freedom to publish content without any consequences, which includes misleading and inaccurate information on finance management options. It is important to note that India is a country where majority of the population is desperate facing issues such as unemployment, inflation, non-performing loans, and starvation. It would be unfair to blame a person in our country who would fall for titles such as “what investments will make you rich ”. Zerodha's Nithin Kamath has also recently expressed his concern over such unregulated activities of the finfluencers. It will be wrong for investors to enter the stock market with false expectations of earning quick and easy money, as set by most of these finfluencers who fail to discuss the risks involved with such investments. Given these circumstances, it becomes essential for SEBI to intervene and regulate finfluencers to mitigate potential risks associated with unregulated disseminating of financial advice online. This will not only safeguard the interests of the novice investors starting their investment journey but will ensure that they are not misled by enticing titles promising instant wealth.

Proposed regulatory measures for finfluencers

SEBI is in the process of finalising a draft discussion paper to regulate the finfluencers and ensure effective control over unsolicited financial advice by advisers on social media. This section outlines certain proposals that SEBI must consider in their draft regulations with the objective of curbing down the unregulated activities of the finfluencers and establishing a more secure environment for the investors.

Definition of investment advice for finfluencers

The current regulatory framework in India lacks a comprehensive definition for “investment advice ”. A major drawback of the existing definition under the Investment Adviser Regulations is that it outrightly exempts any advice given through social media by finfluencers. Considering the rapid advancement of social media platforms, it is imperative that Indian regulations keep pace with such developments and amend the definition to include investment advice given through social media as well. However, SEBI must exercise some caution in bringing finfluencers within its regulatory framework. The content published by finfluencers is not just restricted to financial advice and strategies but also focuses on educating their audience on basic understanding of market and investments. A finfluencer should be able to freely provide factual information about an investment product without any fear of liability. But the moment this factual information is presented in a way that recommends one to buy or not to buy a particular investment product, it will qualify as an investment advice and must fall under the purview of the proposed regulations. Therefore, it becomes important to differentiate between what will constitute as an investment advice and what falls under the category of educational information.

The Investment Adviser Regulations merely defines “investment advice” as an advice relating to securities transaction delivered through written, oral or any other means of communication.6 This definition fails to include the impact of an implied suggestion or opinion made by the advisers that can influence the behaviour of the investor. As opposed to this, many countries have provided a more exhaustive definition for an investment advice. For instance, the Australian Securities and Investments Commission has clearly defined “financial product advice” as a recommendation or statement of opinion which is intended to influence, or which could reasonably be regarded as being intended to influence, a person making a decision in relation to financial products.7 Similarly, the European Securities and Market Authority has expanded the definition of “investment recommendation” by covering any explicit or implicit opinion or suggestion concerning investment strategy including the present or future value or price of such instruments.8 To overcome these shortcomings in India, SEBI must come up with a new definition of “investment advice” which aligns with the international standards.

Eligibility criteria for finfluencers

A registered investment adviser in India must meet minimum education qualification of a graduate degree in finance, economics or business or a professional qualification such as Chartered Accountant (CA), Chartered Financial Analyst (CFA) or Master of Business Administration (MBA). They must have an experience of at least five years in activities relating to advice in financial products or securities. SEBI must ensure to incorporate similar eligibility criteria for investment advice given through online channels by finfluencers.

Social media has become a platform for ordinary people to become famous, yet it is essential to filter out the misleading content created solely for earning more likes and followers from the authentic content aimed at benefitting investors. A minimum qualification set by SEBI with some experience in the finance industry sets apart an investment adviser from an amateur influencer. Such investment adviser will possess the expertise in various financial products and better understanding of the risks associated, thereby guiding their investors to make a well-informed decision regarding their investments. Investors' interest will be well protected with an investment adviser registered with SEBI, who will have more creditability. Moreover, SEBI's dispute resolution mechanism will provide a better and reliable remedy to the investors in event of any conflict.

Disclosure obligations

Social media has become a hub for influencers to earn substantial money though brand collaborations. It is a very common practice for companies to approach influencers to promote their products by utilising their vast reach. Finfluencers may mislead their followers towards purchasing a particular finance product just because they are receiving a good amount of commission for promoting that product. Regulating such activities becomes crucial to protect the investors from the grave damage that may arise if the promoted financial company turns out be a scam. The Advertising Standards Council of India has implemented guidelines for social media influencers, requiring them to include a disclosure label on content related to financial service companies as an advertisement.9 However, there is a need for more stringent regulations and scrutiny over the finfluencers to effectively monitor their content and impose heavy penalties for any violation. A notable example can be found in Germany where finfluencers are mandated to disclose their relationship with the financial company.

In India, the RIAs are bound to disclose its holding or position, if any, in the financial products or securities which are subject matter of advice to the investors along with several disclosure obligations under the Investment Adviser Regulations. The proposed regulations for finfluencers must ensure that the disclosure and penal provision under the Investment Adviser Regulations apply to them with the same rigour as they do to existing RIAs.

Investor education initiatives

An effective regulation with stringent penalties will promote enhanced practices among the investment advisers. However, no matter how efficient the law may be, there will always be few rotten apples in the bunch who will violate them. These wrongdoers may face penalties for their crime, but it is the investors who lose their hard-earned money in the process. It is speculated that even after 14 years since the Sahara scam came to light, more than Rs 1 lakh crore funds of around 13 crores investors are still unpaid.

Unfortunately, there is no straightforward solution to this issue and that is the sad reality. What can be done instead is that SEBI can introduce an extensive and aggressive awareness initiatives aimed at educating investors and warn them against misguided investment advice. Online awareness initiatives, such as SEBI authorised podcast, videos or online discussion group would be a more efficient approach since this will ensure a massive reach and convenience for the investors. Moreover, social media is not going anywhere, and neither are the financial scams, so better make the best use of it.


The rise of financial influencers in India has brought about both opportunities and challenges. While the finfluencers have played a major role in raising much-needed financial awareness among the population, there is an urgent need for a robust regulatory framework to ensure their activities are monitored and malpractices such as misleading opinions or recommendations are curbed down. Regulating online content is going to be a challenging task. The widespread and rapid reach of the social media platform can become its huge drawback whereby any questionable content may have already influenced many investors before it is subjected to scrutiny by regulating authorities. And then, there is the issue of jurisdiction where one can access the online content posted from any part of the world. With technological advancements and continuous invention of new social media applications, it is difficult to assess the extent of control that regulating authorities can exercise. It will be interesting to see how SEBI plans on to overcome these hurdles. While an effective regulation for finfluencers is the need of the hour, equally important is to establish efficient ways for implementing these regulations so as to avoid any potential loopholes in future.

†BA LLB (Hons.) National Law Institute University, Bhopal. Incoming Associate at Cyril Amarchand Mangaldas. Author can be reached at gaargisingh18@gmail.com.

1. National Centre for Financial Education, Financial Literacy and Inclusion in India: Final Report (2019), <https://ncfe.org.in/images/pdfs/reports/NCFE%202019_Final_Report.pdf>.

2. SEBI (Investment Advisers) Regulations, 2013, Regn. 16.

3. SEBI (Investment Advisers) Regulations, 2013, Regn. 7.

4. SEBI, Investment Adviser <https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=13>

5. Securities and Exchange Board of India, Circular No. SEBI/HO/MIRSD/ MIRSD-PoD-2/P/CIR/2023/51 dated 5-4-2023.

6. SEBI (Investment Advisers) Regulations, 2013, Regn. 2(1).

7. Australian Securities and Investments Commission, Information Sheet 269 (INFO 269), <https://asic.gov.au/regulatory-resources/financial-services/giving-financial-product-advice/discussing-financial-products-and-services-online/>

8. European Securities and Markets Authority (ESMA), ESMA's Statement on Investment Recommendations on Social Media,


9. Advertising Standards Council of India, Guidelines for Influencer Advertising in Digital Media (14-6-2021), <https://www.ascionline.in/the-asci-code-guidelines/>

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One comment

  • I found the section about the role of educational institutions interesting. It makes sense to involve them in promoting financial literacy. Do you think financial education can help reduce the influence of misleading influencers?

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