SEBI Uses AI to Regulate Finfluencers, Protect Investors

The Securities and Exchange Board of India (SEBI) has deployed artificial intelligence (AI)-based tools to monitor unsolicited financial advice and unauthorized digital activities. This new initiative targets ‘finfluencers’ who may mislead investors, as detailed in SEBI’s FY26 annual report.

This digital vigilance is increasingly necessary, particularly after a recent Investor Survey revealed that a significant portion of the investing public is influenced by such entities.

Key Investor Influence Data

• 62% of investors are influenced by finfluencers, according to SEBI’s latest Investor Survey.
• Many finfluencers operate without accountability or verified performance data.

SEBI Chairman Tuhin Kanta Pandey highlighted key advancements in supervisory technology, known as SupTech, aimed at strengthening market oversight. These tools are designed to identify finfluencers making unverified claims and ensure market integrity.

New Regulatory Tools and Partnerships

• Project Sudarsan: Monitors social media for financial advice.
• SEBI R(AI)DAR: An AI-enabled platform for reviewing advertisements.
• Google Play Partnership: An initiative for a ‘verified app label’ to help investors identify legitimate stock trading applications.
• Past Risk and Return Verification Agency (PaRRVA): Will provide independent digital audits of claims made by intermediaries to address information asymmetry.

Chairman Pandey reiterated SEBI’s non-negotiable commitment to market integrity, underscoring that investor trust in fair market functioning is crucial for a strong market. The regulator continues to take action against various forms of market abuse.

Combating Market Abuse

• Manipulation in securities and derivatives markets.
• Pump-and-dump schemes.
• Insider trading.
• Front-running.
• Corporate frauds.

SEBI has also implemented specific measures to enhance the orderliness and resilience of derivatives markets. These include reducing expiry-day concentration, rationalizing weekly index options, and strengthening intraday position-limit monitoring.

Looking ahead, SEBI plans to focus on streamlining regulatory processes by removing redundancies and simplifying procedural requirements. Leveraging technology will ease compliance burdens for market participants.

Future Market Development Initiatives

• Deepening the cash equities market.
• Revamping the Securities Lending and Borrowing scheme.
• Strengthening India’s commodity markets.
• Introducing a fast-track mechanism for AIF schemes.
• Developing a single-window clearance system for intermediaries.
• Launching the SEBI Setu Portal.
• Piloting the tokenization of corporate bonds using distributed ledger technology.

The regulator is also advancing its cybersecurity efforts to prepare for quantum-era risks and developing long-term technology roadmaps for market infrastructure institutions (MIIs). These efforts collectively position digital surveillance, market integrity, derivatives oversight, and compliance simplification at the core of SEBI’s agenda to enhance investor protection and market processes.