Unregistered Financial Influencers under scrutiny! Many stock tips online have hidden agendas. SEBI wants stronger powers to expose and penalize unregulated advisors.
India’s market regulator, the Securities and Exchange Board of India (SEBI), has once again sought wider authority from the government to curb unregulated financial advice on social media and access digital communication records to investigate market violations. Platforms like WhatsApp and Telegram have become hotspots for financial influencers and unscrupulous traders who manipulate stock prices by sharing misleading tips in exchange for money. SEBI has been struggling to clamp down on these practices due to its lack of direct authority to access encrypted communications. While the government has yet to approve its request, the regulator insists that these powers are crucial for ensuring market integrity.
SEBI’s Battle Against Unregulated Financial Advice
Over the past few years, SEBI has intensified its efforts to tackle financial fraud on digital platforms. Numerous Telegram channels and WhatsApp groups have emerged as sources of stock tips, many of which are driven by undisclosed vested interests. These groups operate without regulatory oversight, leading to rampant market manipulation, insider trading, and front-running.
The regulator’s latest request, sent in early February 2025, urges the government to grant it the ability to:
1. Remove misleading stock recommendations and financial advice from WhatsApp, Telegram, and other social media platforms.
2. Access call data records and message logs to track communication between individuals involved in market violations.
3. Gain enforcement capabilities similar to agencies like the Enforcement Directorate and the Department of Revenue Intelligence.
Currently, SEBI lacks direct authority under India’s Information Technology laws, which do not classify it as an “authorized agency” for digital surveillance. This limitation has forced the regulator to rely on third-party cooperation, which social media companies have often denied.
Why SEBI Wants Access to Digital Communications
Several high-profile market manipulation cases have highlighted the need for regulatory intervention. SEBI’s investigations have revealed instances where traders used private WhatsApp and Telegram groups to share sensitive stock information ahead of public disclosures. Such practices constitute insider trading, a punishable offense under Indian securities law.
Some of the most common manipulative tactics used on social media include:
– Pump and Dump Schemes: Fraudsters artificially inflate a stock’s price by promoting it in private groups, then sell their holdings for profit, leaving unsuspecting investors with losses.
– Front Running: Brokers or insiders execute trades based on non-public information about large institutional transactions.
– Fake Tips and Paid Promotions: Financial influencers promote stocks for a fee without disclosing conflicts of interest.
The lack of digital surveillance has made it difficult for SEBI to prosecute such offenders effectively. Without access to communication records, proving collusion or intent in these cases remains a challenge.
Regulations Around The Globe
Globally, securities regulators in developed markets like the U.S. and Europe do not have direct authority to remove social media content. However, they can penalize individuals involved in market fraud and misleading investment advice.
For instance, the U.S. Securities and Exchange Commission (SEC) has fined influencers and traders for promoting stocks without disclosure. In contrast, SEBI’s ability to take similar actions is hindered by its lack of access to digital evidence.
Experts argue that rather than seeking blanket digital surveillance powers, SEBI could focus on strengthening penalties for market manipulation and enhancing collaboration with law enforcement agencies.
A Long-Standing Request Yet to Be Approved
This is not the first time SEBI has sought these powers. In August 2022, SEBI Chairperson Madhabi Puri Buch urged the government to allow the regulator to track digital conversations between individuals suspected of insider trading and other market frauds. However, the government denied the request, stating that such powers are typically reserved for agencies investigating serious crimes like terrorism and money laundering.
Instead, the government convened a meeting between SEBI and Meta Platforms (which owns WhatsApp) to direct the company to provide relevant information for ongoing investigations. Despite this intervention, SEBI continues to face hurdles in accessing key data that could aid in its market surveillance efforts.
A government official familiar with the matter noted that while the request is being examined again, granting SEBI these powers would require a significant policy shift that applies to all regulators, not just the capital markets watchdog.
