Finfluencers, Behavioural Biases & Big Money: SEBI’s Crackdown Exposes a Risk India Missed

When SEBI froze ₹546 crores belonging to finfluencer Avadhut Sathe and barred him from the markets, the headlines focused on the size of the action. The real story, however, lies in the scale of his influence: one “trading coach” accumulated more than three-lakh clients and hundreds of crores in fees without being registered as an investment adviser. India has long sensed that the finfluencer ecosystem was expanding faster than the regulatory perimeter. The Sathe order confirms this and raises a deeper question: is India prepared for the risks of influencer-led investing?

SEBI’s interim findings show that Sathe’s academy issued buy and sell instructions, live trading cues and stop-loss levels, all of which are activities restricted to licensed advisers, and collected ₹601 crores in fees. A single, charismatic figure had become an alternative to the formal advisory industry. Academic research helps explain how this happened.

A recent study by Mölders et al. in the Journal of Business Research (2025) finds that finfluencers often act as “change agents” for financial literacy. They normalise conversations about money and position themselves as approachable educators rather than technical experts. Many also collaborate informally with brokers and fintech platforms, becoming unofficial distribution partners. Their appeal comes from relatability rather than credentials. This makes finance feel accessible, but it also creates an information environment where popularity can substitute for expertise.

International evidence shows the risks of such environments. A 2024 paper by Warkulat and Pelster in the International Review of Financial Analysis uses individual trading-account data to track behaviour around Reddit’s r/wallstreetbets. When online attention spikes, retail investors shift into riskier assets, allocate larger portions of their portfolios to new positions and earn sharply lower returns. Positions opened at peak attention earn around –8.5 percent, even when the average long-term investor performs reasonably well. This dynamic is directly relevant to Sathe-style “community trading”. Viral ideas amplify conviction even when underlying fundamentals are weak.

Another line of research examines well-being. A US survey study by Olajide et al. in the Journal of Risk & Financial Management (2024) finds that heavy reliance on social media for investment advice is associated with lower financial satisfaction across generations, even after controlling for income and education. Investors may feel empowered by influencers, but they often feel worse about their financial lives over time.

Hidden Engine Behind Influencer-Led Trading

Behavioural-finance literature also shows that when financial information becomes complex, people tend to rely on mental shortcuts rather than detailed analysis. On social platforms, these shortcuts often take the form of likes, testimonials or follower counts. Such signals create an impression of trustworthiness that may not reflect analytical competence. Finfluencers benefit from this because they offer simple, memorable rules in a domain where most individuals feel overwhelmed.

These behavioural tendencies explain why investors gravitate to digital gurus even when outcomes are poor. Trading becomes part of a personal identity centred on hustle and self-improvement. Influencers succeed because they appear relatable and authentic. Research also shows that emotionally charged content drives more trading activity than sober analysis. The Sathe model, built on community psychology, simplified strategies and charismatic teaching, is a textbook example of these biases at work.

Regulatory Perspectives and Global Responses

Legal scholarship has similarly raised concerns. Sue Guan’s influential article in the NYU Journal of Law & Business (2023) argues that finfluencers act as information intermediaries who can shape prices and investor behaviour yet remain outside broker-dealer regulation. Under US securities law, posts that materially influence investment decisions can trigger regulatory scrutiny even if framed as “education”.

Other countries have already begun to respond. In the United States, the SEC has imposed fines for undisclosed promotions and has pursued enforcement against influencer-led pump-and-dump schemes. In the United Kingdom, the Financial Conduct Authority has issued strict rules for online financial promotions and coordinated cross-border crackdowns on misleading content. Australia’s regulator, ASIC, takes an even firmer stance by holding that any online influence over a financial decision may require a licence, attracting civil or criminal penalties if absent.

Road Ahead for India

India now confronts similar issues, and three gaps stand out clearly.

First, the boundary between “education” and “advice” cannot depend on self-identification. When an influencer provides stock-specific recommendations, advisory rules must apply regardless of disclaimers. Second, supervision should focus on investor outcomes. Global evidence shows that attention-driven trading destroys value for late entrants, and India needs better data on the consequences of finfluencer-led strategies. Third, financial-literacy initiatives must evolve. Traditional literacy focuses on products; the new challenge is information literacy, which involves recognising conflicts of interest, emotional manipulation and survivorship bias.

Finfluencers thrive because they meet real needs for access, simplicity and community. The goal is not to eliminate them but to integrate them into a framework that aligns their incentives with investor protection. If the Sathe case becomes the catalyst for such a shift—guided by academic research and international experience—India may finally build a more resilient digital investing ecosystem.