The rapid digitization of communication has transformed how investors access financial advice and trading opportunities. At the same time, social media platforms ("SMPs") like YouTube, Facebook, Instagram, WhatsApp, X (formerly Twitter), Telegram, etc. have become breeding grounds for securities market fraud. Misleading advertisements and phone calls promising "risk-free returns," fake trading courses, and deceptive testimonials are luring unsuspecting investors into scams. To combat this, Securities and Exchange Board of India ("SEBI") has introduced directives requiring SEBI-registered intermediaries (brokers, depository participants, investment advisors, etc.) to verify their identities on social media platforms before publishing advertisement. In this blog, we will discuss the new rules, their implications, and what they mean for investors and market intermediaries.
SEBI's latest press releases underscore a worrying surge in fraudulent activities across social media platforms. Fraudsters are exploiting the growing reliance on digital communication by promoting fake trading seminars, deceptive testimonials, fraudulent, misrepresented phone calls and apps disguised as legitimate trading tools. Platforms like WhatsApp and Telegram are being misused to circulate manipulated "insider tips," while fake apps on Google Play Store and Apple Store mimic SEBI-registered entities to dupe investors. To address this issue, SEBI has partnered with Social Media Platform Providers ("SMPPs") such as Google and Meta to roll out a verification framework aimed at curbing these scams. This collaboration marks a critical effort to restore trust in online financial content.
Under the new rules, SEBI-registered intermediaries must update their official contact details i.e. email ID and mobile number with the SMPPs as provided on SEBI SI (System for Intermediaries) Portal by April 30, 2025. These details will be used by SMPPs like Google and Meta to authenticate advertisers before allowing them to publish investment related content. Once verified, intermediaries can run advertisements, this enables the SMPPs to cross-check their legitimacy of the Intermediaries. This process of registration ensures that only authorized entities can promote financial services, reducing the risk of impersonation and fraudulent claims such as "assured returns" or "zero-risk strategies." Subsequently SEBI through another press release have also advised its registered intermediaries to comply with the latest guidelines provided by the Telecom Regulatory Authority of India ("TRAI'). All registered intermediaries must only use the '1600' phone number series exclusively for service and transactional voice calls to their existing customers.
These new frameworks are a significant win for investor protection and market transparency of intermediaries. By restricting unverified entities from advertising on major platforms, SEBI aims to stem the flood of misleading content that preys on retail investors by misusing the name of genuine registered intermediaries and by directing the intermediaries for usage of '1600" phone number series for any communication, SEBI enables the customers to verify the genuineness of the phone call. For the public, this means easier access to credible intermediaries, reducing the chances of falling victim to phishing scams, fraudulent calls or fake ads. For SEBI-registered intermediaries, the rules enforce stricter accountability as they must now align their marketing strategies with SEBI's advertising guidelines, avoiding sensational claims or unverified testimonials. Non-compliance could lead to penalties or even suspension of registration, incentivizing intermediaries to prioritize ethical conduct.
Intermediaries must act swiftly to comply with the new norms. Intermediaries should review their advertising content to ensure compliance with SEBI guidelines, avoiding exaggerated claims or misleading language. Proactive monitoring of the verification process on SMPPs is essential to resolve discrepancies quickly. Intermediaries should also keep in check to only use the '1600' phone number series for any communication with its customers. By embracing these changes, intermediaries can not only avoid penalties but also strengthen their reputation as trustworthy players in a sceptical digital marketplace.
While the directive is a proactive step, challenges remain in its execution. SMPPs operate globally, and ensuring uniform compliance across jurisdictions may prove difficult. Additionally, gaps in investor awareness particularly among rural or less tech-savvy populations might still leave vulnerable groups exposed to sophisticated scams.
However, SEBI's collaboration with social media giants reflects a forward-thinking approach to regulating the digital financial landscape. By tightening the advertisements verification processes and fixating official phone number series, the regulator is closing loopholes that fraudsters have been exploiting for quite some time. For investors, this means a safer environment to explore legitimate opportunities. For market participants, compliance is no longer just a regulatory obligation but a strategic advantage in building credibility.
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