SEBI cracks down on WhatsApp and Telegram groups

SEBI cracks down on WhatsApp and Telegram groups

Tips on stocks were shared to inflate the share prices

The market regulator, Securities, and Exchange Board of India (SEBI) has cracked down on WhatsApp and Telegram groups in which stock-tips were being shared to inflate the prices of the shares.

The origin of the proceedings was traced to two complaints received by SEBI in July and October last. The complaints alleged that some persons, not registered with SEBI to function in the securities market as intermediaries, were using the social media platforms like WhatApp, Telegram and Twitter to influence the stock prices. This enabled them to make illegal profits.

The modus operandi indicated that the entities were first taking a position (purchasing the shares) in small-cap companies in bulk quantities. They would then send baseless and fraudulent messages showing strong possibilities of an immediate price hike in such scrips through social media platforms. It led to others taking a bullish position in those scrips.

Once the prices soared, they would take a contrary position by selling the shares. Thus, profiting through such trades.

The Coram of S K Mohanty held that if the noticees had an open position in any exchange-traded derivative contracts, as on the date of the order, they could close out/square off such open positions within three months. They were permitted to settle the pay-in and pay-out obligations of the transactions that took place before the trading closed.

The noticees' bank accounts, amounting to Rs.2,84,29,948 were impounded for alleged unlawful gains.

They were further directed to open an escrow account with a nationalized/commercial bank jointly and severally. The impounded amount was to be deposited in that account within 15 days from the date of the order. The escrow account would be an interest-bearing account created in a lien in favor of SEBI. Furthermore, the funds therein would not be released without the permission of SEBI.

The banks were directed to ensure that till further directions, no debts would be made in the bank accounts of the noticees without the permission of SEBI.

In addition, the noticees were directed not to dispose of or alienate any (movable or immovable) assets, interest/investment/charge on any assets held in their name (individually or jointly), including the money lying in their bank accounts, except with the prior permission of SEBI.

They were also ordered to immediately provide a full inventory of all the assets held in their names, including details of all bank accounts, demat accounts, and mutual fund investments.