Sebi directs portfolio managers to monitor social media to curb frauds

In a move aimed at protecting retail investors from rising fraud on social media platforms, the Securities and Exchange Board of India (Sebi) has issued a fresh master circular, directing registered portfolio managers to regularly monitor platforms like Telegram, WhatsApp, and Instagram.

The objective: to detect and act against fraudulent groups posing as licensed investment professionals.

The circular, issued on July 16, 2025, replaces the previous version dated June 7, 2024, and comes against the backdrop of increasing reports of individuals misusing Sebi’s name and that of genuine portfolio managers to lure investors into illicit schemes.

Sebi's directive underscores a rising concern in the financial ecosystem: the blurring line between regulated advisory services and the unchecked content being disseminated by anonymous or fake entities on social channels.

Vigilance Over Viral Frauds

“It has been brought to [Sebi’s] notice that there are some persons who impersonate as Sebi registered portfolio managers on Telegram, WhatsApp groups or Instagram groups, thereby misleading the investors to defraud them,” the circular states.

In response, Sebi has now made it incumbent upon portfolio managers to routinely scan social media for suspicious activities. If any such impersonation or misuse of name is detected, the regulator expects swift action.

“Based on this continuous monitoring of such entities, concerned Portfolio Manager should promptly take appropriate actions including issuing a press release / public notice, filing FIR etc. to ensure that such entities / groups are prevented from misusing names of such Portfolio Manager,” reads the circular.

This move aligns with Sebi’s recent push to clamp down on unregulated “finfluencers” and rogue financial groups leveraging the reach of social media to solicit money from unsuspecting users.

Sebi’s Compliance Checklist Grows

The revised master circular outlines several operational mandates beyond the social media directive. One of the key additions pertains to the handling of client funds.

According to the circular, portfolio managers must ensure complete segregation of each client’s funds and securities from their own and among other clients. This segregation must be visible both in practice and in records.

Portfolio managers are allowed to maintain a common bank account for all client funds, but with specific safeguards:

• Each client’s fund must be clearly identifiable in back-office records.
• Under no circumstance should the funds of one client be used for another.
• An accounting system must capture and maintain client-wise data.
• Statements reflecting these balances must be shared with clients every month.
• Daily reconciliation of client-wise balances against the bank account is mandatory.
• Background and Next Steps

Earlier this year, reports indicated that Sebi may actively collaborate with digital platforms to weed out finfluencers operating without registration or compliance.

The new directives are being seen as part of Sebi’s wider mission to bring greater transparency, accountability, and investor protection in an increasingly digital financial environment. For portfolio managers, the onus is now firmly on proactive surveillance and robust operational systems—online and offline.