Finfluencers registered as MF distributors may face Sebi scrutiny

The regulator is looking at harmonising the advertisement code for different types of Sebi-regulated entities, Tuhin Kanta Pandey, chairperson, Securities and Exchange Board of India (Sebi), told Mint on Saturday.

“I have been talking to various associations. Several things can be done in terms of rationalization, removing redundancy, in case of combining things, and sometimes combining things across regulations. For example, your advertisement code might be different for different regulations, whether it can be made consistent if the objective is to achieve the same thing,” he said.

“Amfi is supposed to regulate mutual fund distributors (MFDs). If it falls short, our surveillance systems will take care of it, Pandey said on the sidelines of the Mint India Investment Summit and Awards 2025 in Mumbai.

So far, Amfi has not passed any enforcement orders against MFDs in public domain.

In its latest board meeting on 24 March, Sebi said, with help from Meta and Google, it had already removed 70,000 unregistered digital financial advisors. “We are working with the ministry of electronics and information technology (MeitY) and social media platforms—wherever Sebi has the power to do so, Sebi will take it down,” Pandey said.

Earlier, in February, the previous Sebi chief, Madhabi Puri Buch, while addressing Mint‘s queries at an Amfi event, said: “One of the KRA’s for the Sebi team regulating mutual funds is to look at the behaviour of MFDs.”

Buch also told Mint on the sidelines of another Amfi event in July 2024 that MFDs are agents of Sebi-regulated entities, and hence, mutual funds are liable for the actions of their agents.

To be sure, India has a large number of MFDs but a very small number of Sebi-registered investment advisors (RIAs).

Pandey acknowledged this, stating that the number of RIAs in India is highly inadequate for a country of this size, and Sebi wants more people to take up the profession. “We have to look at the systemic issues of why people are not coming forward—are the entry barriers large enough, or are we facilitating? The second is also educating people about whether they are prepared to pay for advice. Because I think, to some extent, free advice has to evolve as a paid business,” he said.

Mint reported earlier in March, quoting a CFA Institute report, that 82% of investors influenced by social media have acted on advice from finfluencers and 72% of them reported making profits. However, only 2% of these influencers are registered with Sebi, raising serious concerns about misinformation and regulatory oversight.

“The much larger issue is about finfluencers who deliberately are trying to remain outside the regulatory purview. Even among these, the ones offering fraudulent advice or indulging in blatant misrepresentation with virtually no disclosures can cause more damage to unsuspecting investors,” said Pankaj Sharma, director, capital markets policy, CFA Institute.

“There is a need to actively engage with social media platforms and do regular and stringent content review to catch offenders and take required action,” Sharma added.