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SEBI Issues Warning Against Online Trading Frauds, Industry Calls for More Action

SEBI issues warning against fraudulent trading platforms and investment schemes, emphasizing the need for investor awareness and vigilance.

The Securities and Exchange Board of India (SEBI) recently issued an advisory alerting investors about fraudulent trading platforms and investment schemes. Scammers are exploiting online messaging apps, social media, and other channels to deceive investors, often posing as SEBI-registered entities. This has raised concerns about the safety of online investment platforms and the need for greater investor awareness.

The advisory follows complaints about deceptive trading platforms falsely claiming ties with registered foreign portfolio investors (FPIs) or foreign institutional investor (FII) sub-accounts. SEBI cautioned investors against fraudulent practices such as offering stock market access without official KYC, using online courses and seminars to lure investors, and using mobile numbers registered under false names to execute schemes.

Nikhil Aggarwal, CEO of Grip Invest, emphasized the long-standing concern about fraudulent platforms and welcomed SEBI's action to raise awareness among investors. He stressed the importance of verifying the registration number of SEBI-registered entities and communicating only through official social media handles.

SEBI's intervention, however, is seen as a necessary but insufficient step by Siddarth Pai, founding partner at 3one4 Capital & co-chair of the regulatory affairs committee at IVCA. He emphasized the need for industry associations to collaborate with SEBI to educate the public about these issues.

The rise of unregistered 'finfluencers' or 'finance influencers' on informal platforms like WhatsApp and Telegram has added another layer to the problem. These influencers often peddle misinformation and promote stocks for personal gain, leading to investor manipulation.

While SEBI plays a crucial role in regulating financial activities, experts believe that more action is needed on the ground to catch fraudulent activities. Collaboration between SEBI and law enforcement agencies is essential to investigate and prosecute those involved in fraudulent trading activities.

As SEBI continues to address these challenges, retail investors are advised to stay vigilant and verify information before making investment decisions to protect themselves from potential scams.