Sebi’s crackdown on Avadhut Sathe and his trading academy marks yet another attempt to tighten oversight on financial influencers. The case draws attention to how finfluencers venture into unregistered investment advisory services under the guise of educational programmes, explains Anjana Therese Antony
What is the Avadhut Sathe case about?
Last week, The Securities Appellate Tribunal (SAT) ordered Mumbai-based Avadhut Sathe Trading Academy and two of its directors to pay 100 crore for unlawful activities between 2020 and 2025.
Last year, the Securities and Exchange Board of India (Sebi) had alleged that the academy made 546 crore from unregistered activities, “recklessly misleading” investors to deal with securities based on its advice. It said that the academy uploaded misleading testimonials of investors, claiming that they made profits while in fact they had made losses.
Neither Sathe nor his academy are registered with the regulator. As per its website, the trading institution has more than 45,000 students and 320,000 participants from over 45 countries and 545 cities. As per media reports, Sathe had also promised to make “100,000 crorepatis by 2031”, a statement that can sway even a non-investor.
While the SAT arrived at the revised amount after certain deductions, the final order by the whole-time member of Sebi would be passed after the conclusion of the original case, independently of the SAT’s directions.
Why does this case matter?
The case serves as a warning to retail investors, especially those new to the securities market, to approach social media buzz about wealth creation with a pinch of salt. In the era of information overload, retail investors are unaware about credible sources and are often lured into investing by many finfluencers who guarantee massive returns.
Sebi has been trying to draw a line between financial education and investment advisory, but experts say the distinction still needs more clarity.A finfluencer’s content falls foul of the law when it gives stock-specific tips, recommendations, or assure returns for investments without getting Sebi’s authorisation.
Many present their content under the garb of educational services while using latest market examples, back-tested data, or giving hints to buy or sell a security, creating a grey area of operations.
Finfluencer vs investment advisor
Both terms are often confused or used interchangeably, but the requirement of the regulator’s authorisation is a key distinction. Currently, finfluencers are not regulated at par with investment advisors.
According to Sebi, a finfluencer provides information, advice, or recommendations on various financial topics such as investing in securities, personal finance, banking products, insurance, real estate investment, etc., through their messages, reels, and videos on various social media platforms.
They are usually neither registered with Sebi nor with other financial sector regulators.
Meanwhile, an investment advisor is a registered individual or entity that advises clients on financial securities, investment strategies, and portfolio allocation. Such an advisor also adheres to Sebi-mandated fiduciary responsibilities.
In late 2024, Sebi mandated that regulated entities, including broking firms and mutual funds, must not engage with unregulated finfluencers in any form. They are permitted to work together only for investor education purposes, and not to promote any security or provide stock-specific recommendations.
Education or market tips?
Sathe’s academy crossed the fine line between financial education and investment advisory. Sebi found that the trading academy published and promoted selective profitable trade and also wrongfully claimed that its students earned high returns from trading.
The use of live market data is a key indicator that distinguishes education from advice. The academy used real-time data for its educational services, which is prohibited by Sebi. The regulator allows educational institutions to use market data with a one-day lag for their services.
Early this month, Sebi proposed a 30-day lag for using price data for educational purposes.
By misusing real-time data, educational institutions are able to influence investment decisions of their audience. Stricter monitoring of usage of live data can prevent this and reduce the number of misleading claims by finfluencers of high returns.
Finfluencer boom, stiffer regulation
Over the years, there has been a significant rise in the number of individuals and platforms that provide investment tips and educational services in India. With this boom, regulation of this segment became a need of the hour, particularly due to the rise in scams and misleading contents.
In 2024, Sebi had informed the Rajya Sabha that it identified 8,890 misleading or unlawful stock market content on social media, prompting action against platforms such as Facebook, Telegram, and YouTube.
Later, Sebi’s whole-time member Kamlesh Varshney had also said that the regulator removed over 15,000 content sites created by finfluencers in just three months.