Sebi crackdown on SMS tipsters yields little result

Instances of SMS and WhatsApp messages offering investors unsubstantiated returns see a surge of 20%

The Securities and Exchange Board of India’s (Sebi’s) crackdown on bulk short messaging service (SMS) and WhatsApp messages with tips on markets does not seem to have made much impact.

An internal analysis by Sebi’s surveillance department shows circulation of tips through mobile-based messaging applications has increased 15-20 per cent over the past few months.

The rise in such instances comes despite the regulator’s action against bulk messages promising extraordinary returns.

“After the order, the intent was to curb the menace of this market malpractice but such instances have increased. There is a need to review the strategy to tackle those,” said a source.

These SMSes are sent to investors with intra-day tips and inducing claims, and have references of website addresses that invite prospective investors to enrol for investment advisory services for a registration fee. These also offer to provide registered clients trading tips on a ‘consideration and profit-sharing’ basis.

As part of its strategy to address this menace, Sebi is likely to initiate a detailed investigation for bringing to light the depth of such activities and the extent of losses caused to investors.

Sources also indicate the market regulator might seek telecom operators' assistance in widening the probe. It could also write to the finance ministry and the department of telecommunications to help curb illegal circulation of such messages.

Sebi had in August 2013 passed an order that action will be taken against persons luring investors with the promise of daily returns of up to Rs 75,000 through mobile messages.

This order was followed by another that barred 13 entities in November 2013.

The latest order was passed in June last year as Sebi cracked the whip on scams involving ‘trading tips’ offered through SMSes and WhatsApp messages by unregistered investment advisors promising guaranteed returns of as much as 200 per cent.

In both cases, Sebi had used the powers to seek call data records from telecom operators that it was given through an ordinance. The Sebi amendment Bill was later cleared by Parliament during the monsoon session, giving the regulator more teeth to nail down market manipulators.

SMS TIPSTERS ON THE RISE

• Sebi observes heightened activity by SMS and WhatsApp tipsters
   
• Activity has increased to the tune of 15-20%
   
• SMSes offering intra-day tips causing losses to investors
   
• Sebi to widen the net of its probe and seek assistance from telecom operators