SEBI Warns Against Online Fraudulent FPI Trading Schemes

The Securities and Exchange Board of India (SEBI) has warned investors about misleading trading platforms that erroneously promise to provide stock market access to Indians through the Foreign Portfolio Investors (FPI) route.

According to INC24’s report, the market regulator has warned that fraudulent trading platforms are exploiting online courses, seminars, and mentorship programmes relating to the stock market to entice victims via social media platforms such as WhatsApp or Telegram and live broadcasts.

Individuals pose as SEBI-registered FPI personnel and urge consumers to download apps for share purchases, IPO subscriptions, and “institutional account benefits.” SEBI underlined the use of fictitious names in mobile number registrations for these fraudulent activities.

SEBI issued the warning statement in response to multiple complaints about misleading trading platforms falsely associated with FPIs and promising trading possibilities via FPI or institutional accounts with alleged unique privileges. SEBI confirmed that subject to certain restrictions, resident Indians are not eligible to engage in FPIs under its FPI Regulations.

Furthermore, SEBI stated that there is no provision for an “Institutional Account” in trading. To gain access to the stock market, investors must first open a trading and demat account with a SEBI-registered broker and depository participant. The regulator highlighted that it has not given any exemptions to FPIs for securities market investments by Indian investors.

The regulator advised investors to “stay vigilant” and avoid any social media messaging, WhatsApp groups, Telegram channels, or applications claiming to provide stock market access via FPIs or foreign institutional investors (FIIs) registered with SEBI.

In India, as in other markets, retail investors purchased shares in response to the pandemic, which was accompanied by an increase of unregistered advisers targeting these investors.

According to research released by SEBI on January 25, 2023, retail investors in India’s futures and options markets increased fivefold during the fiscal years 2018-19 and 2021-22, with nine out of ten losing money.

According to regulatory and exchange officials, many of these channels have between 50,000 and 100,000 members and thousands of similar channels exist. Since August 2022, exchanges have reportedly issued roughly 30 cautionary letters to organisations and individuals on social media sites, warning them against making promises of guaranteed returns without the proper exchange and regulatory licence.