SEBI Cracks Down on 70,000 Unregistered Digital Financial Advisors, but Challenges Remain

The Securities and Exchange Board of India (SEBI) is stepping up its efforts to stop misleading investment ads on social media by requiring intermediaries to verify their identities. But experts warn that financial fraud is still a big problem, as scammers keep finding new ways to trick investors.

Even though SEBI has asked intermediaries to verify their details on platforms like Google and Meta, legal experts think this move might not be enough. Scammers can still hide behind fake identities or operate from other countries where SEBI has no control. Influencer marketing also remains a loophole, as individuals can promote risky investment schemes without directly breaking SEBI’s rules.

Fraudulent activities like fake testimonials, fake investment returns, and unofficial online groups continue to deceive investors into losing money. Financial companies have been warning about impersonation scams, where scammers create fake WhatsApp groups and pretend to be registered entities offering fake investment advice.

Abans Financial Services Ltd, along with other firms, has reported cases of scammers using their brand names to mislead investors. Many legitimate firms have been targeted by fraudsters. At the same time, pump-and-dump schemes are growing. These schemes use fake ads and videos to trick investors into buying manipulated stocks, leading to big losses for retail investors while fraudsters escape without consequences.

To fight this, SEBI has teamed up with Meta and Google to remove over 70,000 unregistered digital financial advisors who are giving unauthorized advice. SEBI is also working with the Ministry of Electronics and Information Technology (MeitY) and telecom providers to tackle these fraudulent schemes.

However, stricter penalties and better coordination with online platforms are needed to fully solve the problem. Intermediaries need to follow stricter rules, like thorough background checks and content approval, to meet SEBI’s guidelines. Investors are also urged to be careful and verify intermediaries’ details through SEBI’s official channels before making any financial decisions. As scammers continue to adapt, staying alert is key to protecting yourself from financial fraud.