SEBI gives timeline to social media advertisers to curb fraudulent ads

In response to a significant increase in fraudulent activities on social media platforms, the Securities and Exchange Board of India (SEBI) has introduced new guidelines requiring registered intermediaries to verify their identities before advertising on platforms such as Google and Meta. This initiative aims to enhance transparency and bolster investor protection within the securities market.

Under the new regulations, all SEBI-registered intermediaries must register on social media platforms using their email IDs and mobile numbers listed on SEBI's SI Portal. SEBI stated, "It has been decided in consultation with Social Media Platform Providers that all SEBI registered intermediaries uploading/publishing advertisements on SMPPs like Google/Meta (to start with), shall be required to register on such social media platforms using their email IDs and mobile numbers registered on SEBI SI Portal."

Recent months have seen a notable rise in securities market frauds propagated through social media channels, including YouTube, Facebook, Instagram, WhatsApp, X (formerly Twitter), Telegram, and app stores like Google Play. Scammers have been exploiting these platforms to lure investors with promises of guaranteed returns, misleading testimonials, and fraudulent online trading courses. SEBI's new measures are designed to curb these deceptive practices by ensuring that only verified entities can promote financial services online. 

These platforms are then required to verify the provided details before permitting the entities to publish advertisements. This verification process is expected to limit deceptive marketing practices and safeguard investors from potential financial harm.

Alignment with the Digital Personal Data Protection Act

These guidelines align with the broader objectives of the Digital Personal Data Protection Act (DPDP Act), enacted on August 11, 2023. The DPDP Act emphasises lawful, fair, and transparent processing of personal data, including the verification of individuals' identities to prevent misuse. By mandating identity verification for advertising, SEBI's measures complement the DPDP Act's provisions aimed at protecting personal data and ensuring accountability in digital interactions.

The urgency of these regulations is underscored by several high-profile fraud cases in India. For instance, in late 2024, authorities uncovered a scheme where fraudsters used YouTube to promote fake investment opportunities, leading to substantial losses for unsuspecting investors. Similarly, fraudulent trading courses advertised on platforms like WhatsApp and Telegram have misled individuals into investing in non-existent or high-risk ventures without adequate disclosure. 

SEBI has set a deadline of April 30, 2025, for intermediaries to update their contact information on the SEBI SI Portal. This initiative seeks to ensure that only verified entities can engage in online promotional activities, thereby enhancing the integrity of the securities market and protecting investors from deceptive practices.