Pump, Dump And Post: Indonesia Needs To Regulate Its Finfluencers

Indonesia's legal framework for financial advisory services remains anchored in Law No. 8 of 1995 on Capital Markets and implementing regulations issued by the OJK. Licensed investment advisors must satisfy competency standards, ethical obligations and fit-and-proper requirements.

These safeguards exist because financial advice directly influences capital allocation and public trust. However, the framework was designed for conventional advisory firms, not a decentralized digital ecosystem where influence is algorithm-driven and monetized through visibility.

The core legal question is substantive rather than formal. If a person provides investment recommendations that influence market behavior and receives economic benefit directly or indirectly, should that activity fall within the scope of regulated advisory services?

If regulatory responsibility depends solely on formal titles, digital actors can operate in a gray zone while licensed professionals bear disproportionate compliance burdens. Such asymmetry undermines fairness and weakens investor protection. The OJK has authority to clarify this boundary through interpretive guidance or regulatory refinement.

Law often trails behind technological innovation and social change, resulting in delayed and fragmented regulation. Proactive measures - such as predictive frameworks and comparative studies - are essential to govern emerging innovations, particularly in the financial sector.

The OJK has adopted a regulatory sandbox approach, allowing new business models to be tested in controlled conditions before general regulations apply, helping authorities assess potential risks before full-scale implementation.

Under POJK 3 of 2024, which replaces POJK 13 of 2018, digital financial business models, processes and products can undergo limited testing prior to obtaining full licensing. The challenge lies in striking the right balance between oversight and innovation.

The sandbox framework should extend beyond business models to include influencers and other entities functionally tied to financial innovation. Such an approach is critical to prevent individuals from exploiting regulatory gaps for personal gain at the expense of retail investors.

While criminal provisions exist to address violations, preventive and administrative regulations are equally vital, ensuring that punitive measures remain a last resort rather than the primary regulatory response.

Comparative jurisdictions offer useful guidance. In the United Kingdom, the Financial Conduct Authority requires authorization for regulated investment advice and has warned that unauthorized financial promotion on social media may constitute a criminal offense.

In the United States, the Securities and Exchange Commission and the Financial Industry Regulatory Authority enforce registration requirements and fiduciary duties under the Investment Advisers Act. Enforcement increasingly targets unregistered crypto promoters and influencers who fail to disclose paid endorsements. The principle is consistent: the substance of influence determines responsibility.

In China, financial advisors are overseen by the National Administration of Financial Regulation, established in 2023, while the China Securities Regulatory Commission continues to supervise securities and futures markets.