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The average stock investor in India today is young, tech-savvy and confident. According to the data in the National Stock Exchange Market Pulse, released for June, the median age of investors entering the Indian capital markets is now just 27 years. Eager to trade, most young investors believe they are capable of leveraging information, largely gathered from social media platforms, to squeeze out the best possible returns from the market.

The problem is that not all the information they gather is genuine and could be misleading. As market participation continues to increase—the count of unique demat accounts crossed the 26 crore milestone in June—more and more investors are now vulnerable.

After encountering and investigating several cases where investors were misled into falling for erroneous stock recommendations, locked into subscription traps under the guise of trading academies and others, capital markets regulator Securities Exchange Board of India (Sebi) has stepped in to clean up the space to safeguard investor interest.

On June 23, Sebi introduced a Common Advertisement Code (CAC), which is set to come into effect in mid-2027, following the conclusion of the public consultation period. The code is expected to alter how finance related content is packaged, delivered and consumed on social media.

Decoding CAC

Restrictions On ‘Celebrities’: One of the key shifts within the code is Sebi’s reclassification of digital influence. The regulation explicitly states that any content creator who crosses the threshold of 500,000 followers or subscribers on a single digital platform is now legally defined as a “celebrity”. The definition adds AI-based avatars, too, to the list.

If an investor suffers financial fraud due to a misleading advertisement fronted by an AI entity, the regulated entity that issued the ad will be liable. “An AI entity does not have a separate legal identity,” says Ishan Johri, partner, Khaitan & Co.

The new rule prohibits “celebrities” from endorsing or pitching financial products, schemes, or trading strategies. A top-tier creator can still promote a brokerage house or a mutual fund company as a corporate brand, but can’t endorse a specific investment product.

Digital Reporting Model: The regulator has put in place 24-hour post-issuance digital reporting model for non-celebrity advertisements. Financial brands can now post real-time digital media assets, provided they upload the creative and tracking metadata to a centralised regulatory portal within a day of publication.

Restrictions On Short-Format Mobile Ads: The code also introduces structural changes to how brands can use short-format mobile advertisements. The code allows companies to host extensive risk disclosures via a mandatory hyperlink rather than displaying the full lengthy disclaimer in SMS alerts and notifications.

Johri says that this relief does not dilute the legal liability of the advertiser if they make a misleading ad. “Advertisements must still be true, fair, accurate, complete and unambiguous, and should not be capable of misleading investors or taking advantage of their lack of experience or knowledge,” he says.

Redressal Framework: CAC provides wide powers to Sebi to redress grievances, while the consumer protection laws act as a backup. Plus, the existing channels remain in place, says Johri.

“The measures available to investors at present should continue to operate such as SCORES, supervisory bodies of recognised industry associations and exchanges and criminal complaints in cases where suitable (economic offences such as mass marketing fraud),” says Nandini Pathak, partner at Bombay Law Chambers (BLC).

The Loopholes

As far as restrictions on “celebrity” ads are concerned, financial institutions looking to drive conversions for specific products can pivot away from mega-influencers and instead undertake product marketing campaigns utilising networks of micro-influencers who remain unregulated.

Talking about the digital reporting process, Pathak says that the delay between publication and regulatory review leaves a distinct gap for retail exposure. “In the absence of clear operational guidelines or rules including clear, objective metrics, fraudulent actors could take advantage of exceptions pertaining to ‘brand’ vs ‘product’ advertising and educational content,” says Pathak.

For example, a finance content creator can upload a tutorial video for futures and options trading and call it “purely educational”. However, they might use the video format to exploit the educational content loophole and explain the steps for the process.

Pathak highlights that viral content moves quicker than the reaction of standard institutional compliance pipelines. “It does not take a long time for online content to spread widely and cause uninformed investors to act on the same, so the post-issuance monitoring framework could allow misleading content to reach and influence uninformed investors before authorities have the opportunity to act,” she says.

AI in ads is also a challenge. Verifying the origin of synthetic media when no legitimate brand is attached is a challenge. “Where an AI-generated advertisement clearly promotes an identifiable regulated entity without its consent, that entity is required to act against it and report the incident,” says Pathak.

Another enforcement-related challenge occurs when digital actors completely obscure their physical and corporate footprints. “The harder case is where the advertisement cannot be clearly traced to any specific regulated entity; that’s likely to remain an attribution and enforcement challenge,” says Pathak.

Impact On Finfluencers

Finance content creators remain hopeful, stating that the new regulations will act as a natural quality filter for the digital space, cleaning out transactional actors and rewarding creators.

Palak Rathi, a finance content creator and chartered accountant (CA), says that the regulation simply codifies the approach she had already implemented. “I’ve always been very clear about the line between explaining financial systems and promoting financial products. My brand partnerships also have always been structured around what I call the editorial-first model,” she says.

The new framework formalises boundaries long respected by ethical players. “The shift forces both creators and regulated entities to think about brand partnerships as long-term equity plays rather than one-off product placements,” says Rathi.

Sakchi Jain, finance content creator and CA, says, “Going forward, partnerships will be about what the brand stands for, why I personally trust it, and why it is relevant to my audience.”

Will operations be an issue? Regarding the 24-hour post-issuance reporting window, Rathi says, “The nuance here is that the 24-hour reporting obligation sits with the regulated entities—the broker, the AMC, the adviser—not the creator.”

Quick coordination will be the key. “There needs to be a proper handoff the moment something goes live so the brand can meet the reporting timeline,” adds Jain.

However, any ad that is flagged is expected to erode the influencer’s credibility, affecting their reach. “What the increased scrutiny is really doing is separating content that was built on genuine value from content that was built on proximity to a financial product,” says Rathi.

Jain says it will add value to a genuine finfluencer. “The creators who are here because they genuinely care about financial literacy will find that their audience trusts them more, not less, as the space gets cleaner.”

What Should You Do?

Do not trust brand ambassadors blindly. Abhishek Kumar, a Sebi-registered investment advisor (RIA) and founder at SahajMoney, warns: “Investors should always remember that the credibility of the brand ambassador should be disassociated from the risk profile of the firm they are promoting as ultimately it is their money on the block.”

Independent evaluation of products remains the key. “Investors should analyse the prospectus, expense ratios, fee structures, and exit loads of the products they are planning to buy rather than relying on the reputation of the firm promoted by the creator,” Kumar says.

Vaibhav Agarwal, chartered financial analyst (CFA), and founder and chief investment officer of Accelt Asset Management, has a simple question investors can ask themselves. “Before committing money, ask yourself: Would I buy this product if there was no celebrity attached to it?”

Some of the things to watch out for are creators promising unrealistic returns and who display personal wealth to validate their financial acumen. “Investors should be deeply skeptical of such courses where the educational material acts as a funnel to lock users into proprietary trading tools, premium chat rooms, or specific broker referrals,” adds Kumar.

On unrealistic returns, Kumar advises: “One should independently verify the returns claims by visiting the official portal of the Past Risk and Return Verification Agency (PaRRVA). If a promotional chart lacks this official verification reference, they should assume the historical returns are not verified as per the Sebi guidelines, and they should stay away from such misleading companies.” PaRRVA is a central agency launched by Sebi. It audits and verifies past performance claims made by market intermediaries before they can advertise them.

Also, ensure any education material shows both sides of the coin. “Genuine education explains both opportunities and the risks,” says Agarwal.

It’s also important to verify the credentials of the finfluencer you are following. “Do check that a finfluencer offering financial advice on social media is registered with Sebi as an Investment Advisor or Research Analyst by checking their registration number on the official Sebi website,” Kumar said.

Finally, to insulate oneself from the emotional volatility of online trading groups, Kumar advises investors to strictly avoid executing market orders based on unverified digital testimonials or private chat recommendations.

By placing stringent norms on who can endorse a product, mandating real-time accountability for financial brands, and outlawing the deceptive practices in the form of ads that preyed on the fear of missing out, the regulator has effectively built a structural shield. However, the ultimate line of defence are individual investors themselves.

Common Advertisement Code (CAC)

Major Changes

• Creators with over 500,000 followers on a single platform, including AI avatars, will be seen as celebrities legally and barred from promoting specific financial products. Only brand-level promotions will be allowed.

• Prior-approval for non-celebrity ads will be replaced by a post-issuance reporting model. Brands will be required to upload ads to the Sebi portal within 24 hours of the ad going live.

• Market intermediaries will be allowed to use short-format digital ads (like SMS), hyperlinks for risk disclosures instead of full-text disclaimers.

• All return claims in ads have to be independently verified by the newly established Past Risk and Return Verification Agency (PaRRVA).

Potential Loopholes

• Brands may try to bypass the 500,000-follower threshold by deploying multiple smaller micro-influencers to push specific products.

• Market manipulators with massive social media following can try to use the “educational content” exemption given by Sebi to disguise aggressive product pitches as general financial tutorials.

• Ads which might be deceptive or manipulative could go viral soon after their release, before Sebi’s 24-hour reporting deadline kicks in and they are flagged for removal.

ayush@outlookindia.com