• In an fascinating growth, pursuant to two issues obtained by Securities and Exchange Board of India (“SEBI“), SEBI initiated proceedings towards specific unregistered persons employing social media platforms these as Telegram, Whatsapp, and Twitter to affect the prices of the shares to make illegal profits.

  • On account of growing scenarios of bulk SMSs being despatched to the buyers and the general community eliciting them to obtain shares of identified stated entities, the SEBI had before said1 that investment assistance and inventory suggestions can only be provided by investment decision advisors and specific other registered entities. To deal with the worries in pinpointing reliable information and facts and its senders, SEBI in consultation with the Telecom Regulatory Authority of India (“TRAI“) had issued instructions2 to give inter alia (a) SMSs pertaining to investment decision recommend/inventory recommendations might be sent only by SEBI registered intermediaries via registered telemarketers and (b) mechanisms to filter and block bulk SMSs with specified determined key phrases such as obtain/provide/hold/accumulate/goal followed by scrip code/name.Thereafter, SEBI also cautioned3 the investors regarding this sort of unsolicited messages not only in the type of bulk SMSs but also by way of sites and several social media platforms.

  • In March 2021, SEBI recommended all registered entities to make certain compliance with the Telecom Professional Communications Purchaser Choice Polices, 20184 (“TCCCP Polices“) issued by TRAI. TCCCP Regulations needed registration of the senders of messages, identification and categorization of distinctive kinds of messages by their headers, to prevent deliberate mixing of marketing messages into transactional conversation to prospects, and and finally bestowed the consumer/subscriber with finish handle in excess of the consent granted in link with the messages like the means to revoke the consent


Primarily based on the complaints received, SEBI executed search and seizure operations on specified unregistered folks (“Noticees”) for a time period of 11 months from January 2021 to November 2021 to find facts suitable to the reported allegations.

SEBI uncovered the next modus operandi in the functions of the Noticees:

  1. Noticees purchase the shares of a particular listed entity

  2. then suggest to their subscribers (on their social media platforms) to get the shares of these types of mentioned entities, ensuing in the development of artificial need and an raise in the prices of these shares and

  3. at the time the subscribers began buying the shares of these types of detailed entity and the inventory price ranges amplified, the Noticees sold the stocks held by them of these types of listed entity, to unjustly enrich by themselves at the expense of other traders.

On the foundation of the conclusions of the investigation and the depositions of the Noticees, SEBI handed an interim buy-cum-demonstrate result in discover (“Interim Get”) on the claimed Noticees5 noting that the Noticees have been earning gains by defrauding the retail buyers on their Telegram channel (which falsely claimed that the Noticees had been in the process of being registered as exploration analysts with SEBI) and that the Noticees have been in violation of certain provisions of the Securities and Trade Board of India Act, 1992 (“Act“) and SEBI (Prohibition of Fraudulent and Unfair Trade Methods relating to Securities Sector) Regulations, 2003 (“PFUTP Restrictions”).

In this regard, it is essential to notice that the Act and PFUTP Restrictions prohibit utilizing or utilizing any manipulative or deceptive products or contrivance6 for violation of provisions of the Act and the PFUTP Restrictions. The PFUTP Rules aside from prohibiting any individual from indulging in any manipulative, fraudulent or unfair trade methods in the securities sector, also specifies sure carry out to be deemed to be a manipulative, fraudulent or unfair trade apply. These types of conduct involves7:

  1. knowingly indulging in any act which creates false or deceptive appearance of trading in the securities current market

  2. inducing any human being for working in any stability for artificially inflating, depressing, sustaining or triggering fluctuation in the price tag of securities by any usually means

  3. any act or omission amounting to manipulation of the price of safety including influencing or manipulating the reference cost or bench-mark price of any securities

  4. disseminating details or assistance via any media, whether bodily or digital, which the disseminator knows to be wrong or misleading and which is created or probable to influence the choice of investors working in securities

  5. fraudulent inducement of any human being by a sector participant to offer in securities with the goal of improving his brokerage or commission or income and

  6. knowingly planting phony or misleading news which could induce the sale or obtain of securities.

SEBI, in the Interim Purchase, mentioned that there was no essential study or evaluation prior to offering tips and the sole function of these types of suggestions was only to create artificial demand for a specific inventory. The investigation done by SEBI corroborates this point. Even though a normal comment in superior faith suggesting trends in the securities market would not qualify as fraud underneath the PFUTP Laws, nonetheless, that was not the method of the Noticees in this circumstance.

Accordingly, as for every the ability accorded to SEBI beneath the Act, the Interim Buy was issued to the Noticees:

  1. restraining them from obtaining, offering, or working in securities

  2. impounding the bank accounts of the Noticees jointly and severally for an amount of money of INR 2,84,29,948 (currently being the total of alleged unlawful gains)

  3. mandating the Noticees to deposit the claimed sum into an escrow account and development of a lien in favour of SEBI and

  4. restricting the Noticees to dispose-off or alienate their property.


SEBI has been conducting research and seizure operations at several destinations in India and has recovered many products employed in the commission of a variety of things to do by numerous entities and people which are not dependable with the Act, PFUTP Rules and a in depth investigation into such activities is underway.8 Even more, SEBI has however all over again cautioned the investors to not depend on the investment decision recommendations/assistance been given from social media platforms and recommended the workout of utmost caution whilst taking financial commitment selections in the securities sector, as these could be schemes and instruments utilized to defraud the buyers. SEBI has been making an attempt to make the traders mindful of many grievance redressal mechanisms accessible to them and inspired them to lodge their problems.9


SEBI recognizes that the tempo at which engineering is increasing provides along with it the dangers of its prospective abuse by offenders who use it for doing illicit functions and is gearing up its monitoring system to monitor these offenders.

The Interim Buy along with the aforesaid push releases carries a prescription of a cautionary strategy for buyers and members in the securities current market. Though SEBI rightfully mentioned that perpetrators of offense hire new approaches, technologies, and advertising and marketing methods to defraud the traders, SEBI has also shown that a collaborative tactic to resolving these evolving concerns is very important even if the exact necessitates a even further overhaul of the present regulatory framework.


1 SEBI PR No. 54/2017.

2 TRAI F.No.311-3/2015-QoS dated August 10, 2017.

3 SEBI PR No.53/2020.

4 Issued by TRAI on July 19, 2018.

5 On January 12, 2022

6 Sections 12A (a), (b) and (c) of the Act and Rules 3, (a), (b), (c) and (d) of the PFUTP Rules.

7 Restrictions 4(2) (a), (d), (e), (k), (o) and (r) of the PFUTP Rules.

8 SEBI Press Release PR No.7/2022.

9 Escalating Consciousness regarding On line Mechanisms for Trader Grievance Redressal, Circular No. SEBI/HO/MRD1/MRD1_ICC1/P/CIR/2022/05, dated January 05, 2022 Empowering Buyers by Trader Charters, SEBI Press Release No, PR No. 2/2022, dated January 17, 2022.

Yogesh Nayak also contributed to this write-up.

Nishith Desai Associates 2023. All rights reserved.
National Regulation Review, Volume XII, Variety 258

By Sia