SEBI Warns Of FPI Trading Scheme Frauds On Social Media

The Securities and Exchange Board of India (SEBI) has cautioned investors about deceptive trading platforms falsely claiming to offer stock market access to Indians via the Foreign Portfolio Investors (FPIs) route.

The markets regulator has issued a warning alerting that fraudulent trading platforms are using online courses, seminars and mentorship programmes related to the stock market to lure victims through social media platforms like WhatsApp or Telegram and live broadcasts, reported Mint.

Posing as SEBI-registered FPI employees, individuals persuade people to download apps for share purchase, IPO subscription, and “institutional account benefits.” SEBI emphasised the use of false names in mobile number registrations for these deceptive schemes.

SEBI issued the cautionary statement in response to numerous complaints about deceptive trading platforms falsely associating with FPIs and promising trading opportunities through FPI or institutional accounts with supposed special privileges. SEBI clarified that, as per its FPI Regulations, the FPI investment route is not available to resident Indians, with limited exceptions.

Additionally, SEBI emphasised that there are no provisions for an “Institutional Account” in trading. Access to the equities market requires investors to possess a trading and demat account with a SEBI-registered broker and depository participant, respectively. The regulator clarified that it has not granted any relaxations to FPIs concerning securities market investments by Indian investors.

In an advisory to investors, the regulator cautioned them to “stay vigilant” and avoid any social media messages, WhatsApp groups, Telegram channels, or apps claiming to facilitate stock market access through FPIs or foreign institutional investors (FIIs) registered with SEBI. 

India, like other markets, saw a rise in retail investors purchasing shares amid the pandemic, accompanied by a growth in unregistered advisers targeting these investors. 

A study by SEBI unveiled on January 25, 2023, revealed a fivefold increase in retail investors in India’s futures and options markets from the financial year 2018-19 to 2021-22, with nine out of ten incurring losses.

Reportedly, regulatory and exchange officials have indicated that many of these channels boast between 50,000-100,000 subscribers, with thousands of similar channels in existence. Since August 2022, exchanges have reportedly issued approximately 30 cautionary letters against companies and individuals on social media platforms, cautioning against promises of assured returns without the necessary exchange and regulatory license.