SEBI Takes Action Against Entities Involved in Bulk SMS Scam Circulating 'Buy Recommendations

SEBI Takes Action Against Entities Involved in Bulk SMS Scam Circulating 'Buy Recommendations

The Securities and Exchange Board of India (SEBI) has taken action against 135 entities involved in a bulk SMS scam. These entities were found circulating "buy recommendations" through bulk text messages, SMSs, and websites for certain companies' stocks. The scam involved manipulating stock prices and volumes through fraudulent acts. The entities responsible for the scam included PV Influencers, who manipulated stock prices, SMS Senders who circulated buy recommendations and Off Loaders who sold the shares at inflated prices for profits. SEBI has imposed fines and barred these entities from accessing the securities market.

SEBI is a statutory regulatory body established by the Government of India in 1992. Its objective is to regulate the securities market and protect investor interests. SEBI was formed to prevent unfair practices and provide a fair marketplace for issuers to raise funds, intermediaries to operate, and investors to make informed decisions. SEBI has quasi-judicial, quasi-executive, and quasi-legislative powers to maintain transparency, accountability, and fairness in the securities market.

SEBI has been cracking down on entities and financial influencers involved in manipulating share prices through social media channels. Investors are advised to be cautious of fraudulent activities carried out through SMSs, websites, and social media. SEBI recommends dealing only with registered intermediaries to ensure the safety of investments.

 

SEBI Cracks Down on Entities Involved in Bulk SMS Scam and Manipulation of Stock Prices

This article discusses the recent news of the Securities and Exchange Board of India (SEBI) taking action against 135 entities involved in a bulk SMS scam. These entities were found circulating "buy recommendations" through bulk text messages, SMSs, and websites to investors, leading to manipulation of stock prices. The article provides background information on the scam, details on how it unfolded, the actions taken by SEBI, and insights into SEBI's role and powers. Additionally, it emphasizes SEBI's advice to investors and the importance of dealing only with registered intermediaries to safeguard their investments.

 

Background:

The article begins by explaining that SEBI initiated an investigation into the trading of scrips (shares) of five small-cap companies after observing an abnormal rise in their share prices and trading volume. SEBI identified strong commonalities in the trading patterns of various entities involved in these five scrips. One common feature was the widespread circulation of "buy recommendations" through bulk SMSs and certain websites. SEBI's investigation uncovered alleged fraudulent acts by certain entities, resulting in the abnormal rise in share prices and volumes of the five companies.

 

Description of the Scam:

The article outlines how the bulk SMS scam took place. SEBI reveals that the entities involved executed a pre-planned scheme centered around the circulation of bulk SMSs. The scam involved three main sets of entities: PV (Price Volume) Influencers, SMS Senders, and Off Loaders. PV Influencers manipulated the price and volume of the five scrips through manipulative trades. The SMS Sender, Hanif Shekh, the mastermind behind the scam, circulated buy recommendations through bulk SMSs. In the final stage of the scheme, the Off Loaders sold the shares at elevated prices, generating substantial profits. These profits were then transferred through multiple layers and conduits to the ultimate beneficiaries, including the promoters of some of the companies and Shekh.

 

SEBI's Action and Consequences:

SEBI's response to the scam is detailed in this section. The regulatory body identified and restrained a total of 135 entities involved in circulating buy recommendations through bulk SMSs, SMSs, and websites. These entities were barred from accessing the securities market and engaging in buying, selling, or dealing in securities. Additionally, SEBI imposed a fine of Rs 126 crore on these entities as a punitive measure. The article highlights that SEBI has been actively cracking down on entities and financial influencers engaged in manipulating share prices through various social media channels.

 

SEBI's Advice to Investors:

The article emphasizes SEBI's advice to investors in light of fraudulent activities prevalent in the market. It warns investors about being misled by influencers or entities providing false investment tips through social media channels such as Telegram, Instagram, and YouTube. SEBI cautions investors to be aware of such fraudulent activities conducted via SMSs, websites, and social media platforms. Furthermore, SEBI advises investors to deal exclusively with registered intermediaries to ensure the safety of their investments.

 

Overview of SEBI:

The article provides an overview of SEBI, explaining that it is a statutory regulatory body established by the Government of India in 1992. Its objective is to regulate the securities market and protect the interests of investors. SEBI's formation aimed to prevent unfair practices and create a marketplace where issuers can efficiently raise funds, intermediaries can operate professionally, and investors can access accurate information.

 

SEBI's Powers:

The article delves into SEBI's powers, which can be categorized as quasi-judicial, quasi-executive, and quasi-legislative. SEBI possesses quasi-judicial powers to pass judgments in cases of fraud and unethical practices in the securities market. This power ensures transparency, accountability, and fairness. The quasi-executive powers enable SEBI to examine the books of accounts and other vital documents, identify violations, and impose rules, judgments, and legal actions against violators. SEBI's quasi-legislative powers allow it to formulate rules and regulations to protect investors' interests, covering aspects such as listing obligations, insider trading regulations, and essential disclosure requirements. These powers aim to eliminate prevalent malpractices in the securities market.

 

This rephrased article provides a comprehensive overview of the bulk SMS scam, SEBI's actions against the entities involved, and the advice SEBI offers to investors. It emphasizes the importance of investor awareness, caution regarding fraudulent activities, and the significance of dealing exclusively with registered intermediaries to safeguard investments. The article also provides insights into SEBI's objectives, formation, and powers, highlighting its role in regulating the securities market and protecting investor interests.

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