Stock market tips, social media tips under Sebi watch

Sebi has taken steps to address the threat of circulating unsolicited messages containing stock advice/investment advice regarding listed companies on social media platforms. According to its annual report for 2021-2022, Sebi conducted three search and seizure operations in FY22 to shut down reports of fraudulent actions being spread through social media and “pump and dump” programs. .

Share advice shared on Telegram and WhatsApp pages or groups to inflate stock prices is a breach of the Fraudulent and Unfair Trading Practices Prohibition Regulations 2003.

The regulator has reviewed the framework for processing unsolicited messages. He also issued warnings to investors not to rely on investment tips and advice on social media platforms.

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“Sebi uses various technological tools to analyze bulk digital data for data available on the web, such as social media data and data from various news sources. Lessons learned from identified cases of manipulation are supplemented with technology to further strengthen Sebi’s oversight capabilities,” the regulator said in its annual report.

Sebi, in consultation with the Telecom Regulatory Authority of India, has issued instructions to ensure that investment advice/stock advice via SMS is only sent by Sebi-registered intermediaries via registered telemarketers. He researched mechanisms to filter and block bulk SMS with certain identified keywords such as buy, sell, hold, etc., followed by the certificate code and name. Earlier this year, the regulator for the first time allowed investors to withdraw bids for Ruchi Soya’s Rs 4,300 crore FPO due to misleading text messages circulated in violation of the ICDR, 2018.

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“Sebi and the government are concerned about the proliferation of the stock market on social networks. Many of them come from unregistered entities, with limited visibility as to whether the account is genuine or fake. This has the potential to mislead consumers and lead to ‘pump and dump’ and other similar schemes,” said Vikramjeet Singh, Partner, BTG Legal.

Earlier this year, Sebi shut down a telegram channel, Bull Run, following an investigation that involved the seizure of the defendant’s mobile phones.

“The inherent anonymous nature of social media also means that it is difficult to trace the original individuals, and this requires a large investigative and enforcement team. India, getting information about them is a challenge,” Singh said.

“Telegram allows the creation of public channels where a large number of subscribers can be added without disclosing the identity of the people behind these channels. These channels essentially act as a message-dissemination forum where only administrators are allowed to post messages. messages, the content of which is solely decided by them. The increase in the number of equity investors over the past two years has also increased the chances of them being duped by fraudsters,” said Abhinay Sharma, Managing Partner, ASL Partners.

The number of demat accounts crossed the 100 million mark a few weeks ago.

The regulator may seek the power to intercept and decrypt social media data by seeking authorization under the Information Technology Act 2000. It is also reportedly looking to develop web intelligence tools to monitor social media and has recently launched an expression of interest in providing a web intelligence tool to obtain data from the web, possibly with a view to gathering data unstructured files publicly available from the web, including public websites, social media platforms, and open source databases.

“Investor education, an effective enforcement mechanism, collaboration with other regulators and private entities such as YouTube and Telegram could help prevent the threat of unsolicited tipping advice, especially by investment advisers. not registered. The regulator should leverage AI and big data analytics to counter these threats,” Sharma said.

“Sebi shall create a mechanism for investors to immediately complain about unwanted tips via a specific phone number or email. Sebi may create separate handles for Twitter, Facebook and Whatsapp where investors can voluntarily forward such unsolicited tips and treat them as suo-moto complaints,” said Anshul Gupta, Managing Partner, ANG Partners Advocates & Solicitors.