Buy this stock and sell that one. On numerous social media platforms, stock and mutual fund recommendations are a common topic of conversation. Any company that is not registered with the Securities and Exchange Board of India (Sebi) is prohibited from providing stock or mutual fund advice, which includes recommendations.
Fake financial influencers prey on novices greed and promise of quick returns.
In its ruling, the market regulator noted that these six persons lacked registration with Sebi to act as intermediaries in the securities markets, but were using social media platforms like Telegram and Twitter to artificially affect stock prices and illegally profit.
In addition, the regulator has prohibited these six persons from directly or indirectly purchasing, selling, or trading stocks until it issues further orders regarding this fraud. Under the Securities and Exchange Board of India Act, 1992; Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003; and Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995, these individuals have received an interim order and a show-cause notice.
During its investigation, Sebi discovered that the six accused performed their actions via a Telegram channel named Intraday Calls-Bull Run Investment Educational Channel, which had 52,000 followers as of 14 December 2021.
Sebi stated in its order that the prevalence of these scams has increased alongside technological development. According to Rajesh Keswani, director of public markets at o3 Securities, a capital syndication advising service, the most crucial part is raising awareness and ensuring that advice comes from a Sebi-registered source. Here are five methods to avoid falling victim to uncontrolled “experts'” stock recommendations.
1. Check Sebi Registration
Before adopting the advice of any individual or organisation, investors should determine whether or not they are registered with Sebi. Investment advice from non-Sebi-registered firms should not be followed.
2. Attend Investor Education Programmes
Sebi, along with various market participants like fund houses, financial planning firms, market investment and wealth management firms regularly carry out educational programmes for retail investors. Usually, these programmes are conducted free of cost. Educate yourself on the fundamentals before investing in any instrument. This will not only make you more aware but also give you the tools to spot bad and unauthorised advice.
3. Get Help From Industry Experts
Every year, many fund houses conduct live sessions with industry experts. Investors can join such sessions, which are usually conducted over a few days, to get better clarification from experts and interact directly with them. Such sessions have been happening virtually for the past two years.
4. Lodge Immediate Complaint
If any investor feels that he/she is not getting proper information related to investment or suspects that the advisor is not genuine, Sebi has various mechanisms where individuals can lodge complaints. The regulator also carries out constant surveillance to curb down such fraudulent activities.
5. Follow Genuine Advisors
Various market-related organisations such as the Association of Mutual Funds in India (Amfi) often publish advertisements with detailed guidance on investment. Following those can help investors and protect them from stock recommendation scams.
There are many self-styled market analysts or market experts peddling snake oil. Proceed only after checking if they are genuine and Sebi-registered.
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Disclaimer: This article is for information and education only and is not a stock recommendation. Investments in securities markets are subject to market risks. Read the full disclosures.
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