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Sebi takes action against social media tipsters for illegal gains

SEBI has barred the six individuals from the securities market until further directions and has impounded their bank accounts for an amount of Rs 2.85 crore

Sebi takes action against social media tipsters for illegal gains
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Sebi takes action against social media tipsters for illegal gains

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SEBI has barred the six individuals from the securities market until further directions and has impounded their bank accounts for an amount of Rs 2.85 crore

At a time when instant messaging and social media platforms like WhatsApp, Twitter, Signal, Telegram, etc., have become the go-to platforms for many tipsters to circulate stock-specific recommendations often with a vested interest the capital market regulator has sent a stern signal to such alleged wrongdoers.

In an order issued on Wednesday, the Securities and Exchange Board of India (SEBI) barred six individuals from the securities market for allegedly using social media platforms like Telegram and Twitter to artificially influence stock prices with a motive to make illegal gains.

"The modus operandi typically being followed was that they used to first buy shares of selected scrips in their trading accounts (as well as trading accounts of family members) and thereafter they used to circulate favourable messages about those scrips through the Telegram Channel amongst the thousands of subscribers enticing and inducing to purchase those shares and afterwards the Noticees are seen to have sold their pre-acquired shares of those specific scrips (about which they have circulated their recommendations to the subscribers) immediately or in next few days thereby pocketing large amounts of profits for themselves," stated the SEBI order.

The regulator further found that six individuals -- Himanshu Mahendrabhai Patel, Raj Mahendrabhai Patel, Avaniben Kirankumar Patel, Kokilaben Mahendrabhai Patel, Mahendrabhai Bechardas Patel and Jaydev Zala -- made combined gains of Rs 2.85 crore between January 1, 2021 and November 12, 2021.

The order further highlighted the fact that the individuals did not possess basic qualifications related to the securities market but still disclosed in the group that they were a group of four persons having "combined experience of 40 years in the securities market and are in the process of seeking registration with the Regulator".

As part of the order against the individuals, SEBI has barred the six individuals from the securities market until further directions and has impounded their bank accounts for an amount of Rs 2.85 crore, which, as per SEBI, is the quantum of unlawful gains.

Dwaipayan Bhattacharjee
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