Fake stock tips continue to circulate

Sources say regulators and police cyber teams haven't been able to identify people involved in such practices

The Securities and Exchange Board of India's (Sebi's) and Telecom Regulatory Authority of India's (Trai's) joint effort to curb messages on mobile phones (SMSes) with fake stock tips has not yielded the desired result.

Many continue to receive these, claiming to be sent from leading brokerages. Sources say the regulators and police cyber teams haven't been able to identify the people doing this.

Regulators can only warn investors of such traps, said an official at one.

Sources say in most of these cases, the database servers in question are based outside the country. And, encryption technologies make it more difficult to track, explained another person in the know.

"This is a serious situation and requires urgent action. This should be done by identifying and significantly punishing at least two-three people, so that the message would go loud and clear to other fraudsters. For this, the regulator needs to outsource cyber experts, maybe (hire from) even outside India, to crack down on the syndicate," said Prithvi Haldea, chairman of Prime Database.

Additionally, there should be monitoring of entities which acquire large quantities of shares of companies whose stock prices are propped through fake tips, he said.

Sebi has issued advertisements for investors using social media for stock-specific information to not get swayed by such tips. And, to have questioned some brokers, suspecting they could have been using third-party bulk SMS providers to circulate the tips.

Meanwhile, the offenders are widening their experimenting. One SMS, for instance, recommends buying 'Funny Software', apart from typical details like entry price, stop-loss, trade quantity, target price and holding period. Such little-known companies' publicity seems to have increased in recent months. "Such trick help create liquidity, providing an exit to share operators who take positions when the price is low," said a broker, on condition of anonymity.

Some of these stock operators also provide a price trigger. For instance, the company would be receiving a major order from a large company or be an acquisition target of a well-known entity.

Sebi's move came after top brokerage houses such as Motilal Oswal, India Infoline Financial, Angel Broking and HDFC Securities complained that their names were being misused by dubious operators. Some had also filed police complaints in the matter.