Rising stock market frauds puts Sebi on high alert; calls for swift action

Broker lookalikes and scam apps draw regulator's second caution notice

A surge in spurious applications (apps), websites, and even contact numbers impersonating stockbrokers and their officials has raised concerns, prompting the market regulator Securities and Exchange Board of India (Sebi) to call for swift action from its regulated entities.

 

With instances of investors being duped of crores through these apps reaching the regulator, Sebi Chairman Tuhin Kanta Pandey, in a recent meeting with industry representatives, urged stricter action by registered intermediaries, said sources.

 

People aware of the development said the regulator is strengthening its internal teams focused on cybersecurity, surveillance, and alerts owing to the rising number of such cases. Sources added that Sebi has taken serious note of the surge and asked stockbrokers to initiate first information reports (FIRs) against such entities at the earliest, apart from following the standard procedure prescribed in such cases.

 

Stockbrokers are required to issue public notices and alert investors if they find entities impersonating them. They must also file criminal complaints against such portals. A stockbroker added that Sebi’s concern lies in the delays in initiating such actions.

 

Another industry player shared that there have been cases where fraudsters impersonated relationship managers from reputed entities and misled investors to fraudulent portals.

 

“We are looking into such matters very seriously and have issued public notices in each such instance. We have also been successful in taking down such apps and entities on social media platforms using our name. We have asked platforms such as WhatsApp and Facebook to remove such groups whenever they have come to our notice,” said an executive from a leading broking firm. 

 

The cumulative figures on the total number of such instances and losses to investors could not be ascertained, as industry executives said this data is not maintained. However, there have been cases where investors lost as much as ₹9–10 crore due to such mala fide practices.

 

“Reporting such offences is mandatory under the law. Whether it leads to any hope of recovery is case-specific and depends on whether the fraud is detected and traced at an early stage. Filing an FIR helps establish a legal trail and can potentially lead to arrests or takedowns of the fraudulent infrastructure. Investigation by law enforcement also helps prevent future frauds when agencies learn from the patterns,” said Gauhar Mirza, partner, Cyril Amarchand Mangaldas.

 

Emailed queries to Sebi remained unanswered until the time of going to press.

 

On Wednesday, the market watchdog issued a caution notice to investors on fake entities on social media platforms. This is the second such notice in less than two months, with a similar communication issued in mid-April.

 

Sebi highlighted that gullible investors are being trapped through fake profiles created by entities posing as securities market experts and impersonating registered entities, public figures, and chief executive officers/managing directors of well-known institutions. They are also lured via unsolicited invitations to join WhatsApp groups for trading courses or advice.

 

The regulator reiterated that investors should verify the registration status of entities on the Sebi website before investing or carrying out transactions.

 

Earlier, Sebi had proposed ‘Pay Right’ for secure transactions only through Unified Payments Interface with registered stockbrokers. In another move to curb such instances, Sebi in April advised all regulated entities to use only the ‘1600’ phone number series for service and transactional calls to their existing clients.

 

Watchdog tightens grip

 

Crack down, fast: Regulator presses firms to act against fake platforms

 

Cyber wall incoming: Internal teams to be beefed up for digital threats

 

Scam alerts mount: Fresh warnings to investors against fraud groups

 

Notices not enough: Sebi wants brokers to file FIRs, not just issue alerts

 

Locking the line: Only ‘1600’ series numbers allowed for client calls