Monitor Social Media Platforms Regularly To Curb Fraudulent Practices: SEBI To AMFI

In a letter to the industry body Association of Mutual Funds in India (AMFI) on Wednesday, the Securities and Exchange Board of India (SEBI) reportedly directed mutual funds to monitor social media platforms regularly.

“Mutual funds shall be vigilant and regularly monitor social media to identify entities, or groups, which camouflage themselves as registered mutual funds, or misuse the names of mutual funds, to lure the investors,” said SEBI.

In case of such identification, the regulatory body has advised the mutual funds to take immediate action, including issuing a press release/public notice or filing an FIR.

The letter came after a media report stated that fraudulent Telegram groups are on the rise and lure investors to invest in fake mutual funds. Some of the names mentioned in the report were Paytm Doubling Mutual Funds, Tata Mutual Fund Investment, Bitcoin (Mutual Funds), etc. These accounts have a user base of 50,000 to 90,000 people, SEBI said in its letter to AMFI.

In its annual report in October, SEBI highlighted that it carried out three search and seizure operations in FY22 to put a check on fraudulent stock tips and ‘pump and dump’ schemes that were being circulated through social media.

It mentioned that the widespread use of the internet and digital media has increased the speed at which perpetrators widely transmit and misuse non-public information.

The government is planning to introduce rules to regulate social media influencers. Under the new rules, it would be mandatory for influencers to make disclosures about their paid reviews or paid promotions. Further, under the new guidelines, creators and influencers could be penalised by as much as INR 50 lakh if they do not disclose their financial association with brands.

This step is critical in today’s context considering the rise in the number of unregistered and unsolicited financial advisors or fin-fluencers. It has come into notice that some companies even use these fin-fluencers to boost their share price. This becomes a key issue as there is no clarity or transparency on the educational qualification of most influencers.