How Sebi's Finfluencer Rules Compare With Global Practices

In recent years, financial influencers—often called "finfluencers"—have gained popularity on platforms like YouTube and Instagram. While some offer helpful financial education, others promote risky investments or give advice without proper qualifications. To protect investors, regulators worldwide are stepping in. India's Securities and Exchange Board (Sebi) has introduced new rules, but how do they compare with approaches in countries like the US, UK, and Australia?

Sebi's Approach

Sebi also brought in some regulations in 2023 and 2024 concerning regulating influencer behaviour and restricting the dissemination of unverified financial tips. The regulations are as follows:

• No collaborations with unregistered influencers: Registered organisations such as stock brokers, mutual funds, or advisors cannot partner with unregistered finfluencers. This applies to promotions, endorsements, or affiliate marketing.

• Prohibition on indirect payment: Even indirect pay like free goods, commission, or referral links is not permitted without the influencer being registered with Sebi.

• Disclosure requirements: Registered influencers (like SEBI-registered investment advisors) will have to disclose in unambiguous terms their registration, and whether they are being paid to endorse a product or a service.

• No use of live data: Finfluencers cannot use live data from the stock market in their posts unless it is permitted. Learning posts should use data that is more than three months old.

• Fines and deletions: Sebi has collaborated with platforms to delete more than 15,000 unregulated or misleading videos and posts. There are going to be additional enforcement actions.

• Ban on deceptive words: The use of words such as "guaranteed returns" or "expert advice" is prohibited unless coupled with proper regulatory credentials.

• Broad reach: Even foreign influencers may be taken to task if their tweets target Indian investors.

These initiatives will instill a sense of responsibility in an otherwise unregulated space and safeguard retail investors against being tempted into sensationalised or high-risk advice.

United States: SEC's Enforcement

The United States Securities and Exchange Commission (SEC) has also been rigid on social media-based stock promotion. In 2022, it charged eight influencers for 100 million dollars in a fraud case for Twitter and Discord-based stock promotion.

In a highly publicised case, Kim Kardashian paid a 1.26 million dollar penalty to promote a cryptocurrency without revealing she had been compensated 250,000 dollars for the endorsement. Influencers must reveal any kind of payment and, in certain situations, register as investment advisers to the SEC and Federal Trade Commission (FTC).

United Kingdom: FCA's Collaborative Model

The UK's Financial Conduct Authority (FCA) requires that all social media financial promotions are "fair, clear, and not misleading." It is against the law to market financial products without FCA approval.

The FCA also collaborates with platforms to take down non-compliant social media content. More than 10,000 misleading social media content were taken down in 2023 alone. The FCA has urged stricter rules on crypto adverts and other high-risk investments often touted online.

Australia: ASIC's Licensing Requirements

Australia's securities regulator (ASIC) asserts that whoever provides financial advice is required to be licensed under an Australian Financial Services (AFS) licence. It has prosecuted finfluencers who have offered "pump and dump" schemes and misled followers without being licensed.

ASIC also collaborates with Google and other platforms to filter financial services advertisers. Everyone selling financial products online must demonstrate that they are covered by an AFS licence.

France: Legal Definitions and Bans

One step further has been taken by France by law defining who can be referred to as an influencer. The law restricts the promotion of high-risk financial services such as cryptocurrencies. They can be punished for up to six months in prison and up to 300,000 euros in fines if they break the law. The French government also requires full transparency when it comes to influencer marketing.

As more investors turn to social media for advice, striking a balance between free expression and responsible regulation will be critical. Sebi's recent steps are in the right direction—but global practices show that regulation must evolve continuously to stay ahead of digital trends.