The Securities and Exchange Board of India (SEBI) has issued a consultation paper which is looking to curb the spread of trading tips through bulk SMS, emails, telephone calls, social media services such as WhatsApp, Facebook, Twitter, WeChat etc. SEBI also considered banning games, competitions and leagues relating to the stock market.
The markets regulator that it would follow it up with a paper after giving a warning to investors in September. The final date for submissions to the paper is November 4th.
SEBI said that people distributing stock tips will need to obtain registration as an investment adviser. SEBI added that it will be adding a clause in its Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market (PFUTP) regulations to this effect.
SEBI also said that no persons will be allowed to or offer any scheme/competition/game/ league on securities or related to securities market and will be amending the PFUTP regulations for the same.
Companies such as the Indian Trading League (endorsed by cricketer Kapil Dev) and Stock Race(promoted by Satyug Gold Private Ltd.) are some of the companies running contests and offers investors prizes up to Rs 10 lakh. Stock Race, on the other hand, has prizes which include Mercedes Benz cars, Harley Davidson bikes, Apple products and gold coins.
Earlier in August, it had issued a warning to investors to not participate in leagues,schemes, competitions and games related to securities markets. Under such schemes, contestants have to pick a stock, currency or commodity and predict the increase or decrease price in a time frame.
Crawling social media and websites
In July, Press Trust of India reported that SEBI is planning to put in place a system which would crawl the internet and social media platforms for round-the-clock monitoring of market-moving developments. It was looking to get an agency which will go through Twitter, Facebook, websites of registered intermediaries. This would also include blogs of advisers and investors, specific LinkedIn groups, news chatrooms, Bloomberg and Reuters chats. The information would be captured and provided to SEBI the next day.