SEBI's Social Media Deterrent Is A Start, More Needs To Be Done

SEBI’s latest directive for financial advertisements on social media makes it harder for fraudsters to blend in with legitimate financial entities. But it does not fully address the larger issue of unregulated investment promotions and social media’s role in enabling financial fraud.

Under the new rule, all SEBI-registered intermediaries must verify their identity with platforms such as Google and Meta before running advertisements. Advertisers must now register using their official SEBI-linked email and phone number, ensuring greater transparency and accountability.

The rise of digital communication has given financial fraudsters an unprecedented reach. SEBI has observed a surge in misleading financial promotions across platforms such as YouTube, Instagram, WhatsApp, and Telegram.

Fraudsters exploit the lack of verification to impersonate investment advisors and stock market experts, promise ‘guaranteed’ returns, display fake testimonials and sell dubious online trading courses or premium investment strategies.

Until now, social media platforms had no mandatory process to verify the legitimacy of financial advertisers. Scammers could create anonymous accounts, push misleading ads, and disappear—often faster than regulators could react.

By requiring intermediaries to register and verify their credentials before advertising, SEBI’s policy adds a layer of security that was sorely missing. 

The benefits of SEBI’s move include setting a digital trail, making it easier to track and investigate misleading promotions. Fraudsters can no longer pose as SEBI-registered advisors or financial firms without exposing themselves to scrutiny. Moreover, it will now be incumbent on platforms like Google and Meta to verify the advertiser’s credentials.

While SEBI’s directive has raised the bar for financial advertising, it does not shut the door on fraudulent investment promotions.

Fraud Detection
SEBI’s verification rule is a reactive approach—it ensures that legitimate financial advertisers can be identified, but it does little to proactively stop fraudulent advertisements before they reach investors.

SEBI must bolster in-house resources, especially those  related to real-time detection on the lines of its market surveillance systems for fraud detection. Such scans can suspend suspicious financial advertisements before they gain traction. Social media platforms already deploy artificial intelligence for content moderation—why not for financial fraud detection?

AI can be used for pattern recognition of fraudulent claims and behavioural analysis of advertisers. Many fraudulent financial advertisers display distinct behavioural patterns, such as creating multiple accounts, frequently changing their website links marginally, or running ads from newly-registered domains. 
SEBI, in collaboration with social media platforms, can develop an automated alert system that continuously scans organic content, influencer posts, and paid advertisements for potential fraud. This system can flag suspect promotions, allowing SEBI and platforms to act before much damage can be inflicted.

AI can also analyse user complaints and feedback on financial advertisements, identifying patterns where users frequently report misleading investment promotions. If multiple users flag an advertisement, it should be automatically reviewed and, if necessary, removed.

Many scams originate outside India’s jurisdiction, making enforcement difficult. AI can track and identify links between global fraud networks, enabling regulators to coordinate with international agencies to shut down such cross-border investment scams.

To turn this from a deterrent into a comprehensive solution, SEBI and the Advertising Standards Council of India must take additional steps, such as expanding verification to all financial advertisements, making social media platforms financially accountable, and creating a public registry of verified financial advertisers.

SEBI’s verification rule is a much-needed deterrent, making it more difficult for fraudsters to run deceptive financial advertisements. A combative mix of on-the-move detection and strict enforcement, powered by emerging technologies can ensure a proactive rather than reactive approach to regulation by SEBI.