The TRAI has put the onus on of filtering stock markets advice related bulk SMS content in what appears to be, frankly, an unrealistic expectation of enforcement, making this an exception from its historical “penalise on complaints” approach to bulk SMS. A copy of the direction is here. In the order, the TRAI had said that SEBI had brought to its notice that “some unscrupulous persons or entities, masquerading as SEBI registered investment adviser [etc] are sending bulk SMS relating to investment advice or tips to telecom users for financial gains by manipulating the security market”…”the misuse of bulk SMS route in securities market is not showing any sign of being reigned in despite enforcement actions taken by SEBI against entities indulging in such manipulation using the bulk SMS route.
First, the TRAI order:
- Stock tip related SMS only from SEBI registered entities, through a registered telemarketers: registered SMS’s relating to investment advice/stock tips only from SEBI registered investment advisors, stock brokers, sub brokers, portfolio managers and merchant bankers (as per the list available on SEBI website) shall be sent through registered Telemarketer.
- Sent only as a transactional message: Messages from SEBI registered investment advisers shall only be sent as transactional message either directly or through a registered Telemarketer. Such messages shall not be sent or allowed to be sent as promotional messages (not permitted with a promotional header).
- SMS filter for telemarketers: Necessary arrangements shall be made to filter and block SMSs sent by Telemarketers using bulk SMS channel (telecom resources taken for promotional messages) containing certain key words relating to securities followed by Scrip code/ Scrip name provided by any recognized stock exchange. The specific keywords:
- buy/Sell/Hold/Accumulate/Target followed by Scrip code/Scrip name provided by any recognized stock exchange
- Scrip code / Scrip Name provided by any recognized stock exchange, or
- Stop loss target price, or
- New 52 week high,
- Tip for Intraday
- SMS filter for regular subscribers: SMSs relating to investment advice sent by subscribers not registered with TRAI as a Telemarketer shall also be filtered and blocked using these key words through the signature solution already implemented by service providers
- Verification before sending SMS: Before sending any SMS relating to investment advice or tip, verify from the list of registered investment advisers at the SEBI website whether the person or entity on whose behalf the message is sent is a SEBI registered investment adviser, collect requisite documents and verify the identity of the sender. Such verification shall also be done by registered Telemarketers and only after such verification any SMS relating to investment advice or tip shall be permitted to be sent. The documents relating to the identity of the sender shall be kept for a year.
1. Process: First and foremost, the TRAI should not be implementing a content filter, no matter what the purpose. Secondly, such a significant decision – even if fewer people use SMS than in the past – should have gone through a consultation process.
2. Filtering is a shift from TRAI’s previous approach: Filtering is a major shift from the TRAI’s previous approach to unsolicited promotional messages, which was based on regulating telemarketers through telecom operators, based on an act-on-complaints approach. Customers would complain to the telecom operator/TRAI via particular SMS code, the telecom operators would validate the complaint. Telemarketers would be fined (significantly) for every violation, and subsequently disconnected.
Promotional SMS’ were to be sent only to those users who were not registered on the Do-Not-Call registry, and transactional messages were to be sent (typically using an alphanumeric short code) only to people who registered to receive that SMS. The onus is on the telemarketer to prove that consent has been taken.
This system has broken because it isn’t being enforced properly: there are insufficient penalties on telecom operators, who benefit financially from allowing violation (sending bulk SMS). It’s likely that there isn’t an audit/mystery shopping checks on telecom operators, to hold them accountable.
3. A filter is not a reasonable response: This is an concern specific to point 4 above, about filters for regular subscribers. While we understand that the TRAI is trying to prevent the usage of modem farms – where companies buy SIM cards in the hundreds and thousands, and send promotional messages , this is still an instance of throwing out the baby with the bathwater. What the TRAI and SEBI have ended up doing here is also preventing, stock tips from, say, one friend or a family member to another. That’s free speech, and if SEBI disallows this, in my opinion, it’s a violation of Article 19, and an unreasonable restriction.
Content filters amount to censorship. It’s one thing for a private messaging board to implement filters to prevent abuse on its private property, quite another for a regulator to enforce filtering across the network. Even telecom operators, private parties who use public resources like spectrum are accountable for violation of Article 19.
Filters are a slippery slope: once in place, people will find reasons for them to grow.
3. A filter is not an effective response: TRAI is implementing a technology solution for a process issue. Perhaps filters are easier to implement, but they won’t be effective. People will find means of saying the same thing without using the same words. How difficult is it to use:
- Abbreviations: Targt Hindstn Unilver Rs 20
- Symbols and leet-speak: $ell Hindstn Unilver Rs 20
- Special characters: Búy HÜL Rs 20
An alternate approach
Note that these suggestions are based on information asymmetry: the TRAI obviously has access to more information than I do.
1. SEBI and TRAI should set up a separate SMS short code, asking for complaints regarding unsolicited commercial communications that relate to stock markets advice. The TRAI may prioritise higher telecom operators acting on complaints regarding stock advice, as compared to other SMS spam complaints.
SEBI and TRAI may also consider deputing a joint team that monitors and acts on stock market related complaints in realtime, for a period of a year (or longer), to act against unregistered advisors and telemarketers.
2. For registered telemarketers:
- Spot checks/mystery checks on telemarketers and telecom operators: on whether telecom operators are acting in consonance with TRAI regulations, and imposing heavy fines on infringement.
- Telecom operators should report SMS Spam related to stocks to SEBI and TRAI, which should look into these instances on a case by case basis, instead of mass filtering. While it is impossible for telecom operators to monitor each SMS, even when their bulk SMS solutions are used, individual registered telemarketing companies should monitor messages and should report infringement of SEBI regulations to telecom operators, who then need to report these to SEBI. SEBI should prosecute unregistered investment advisors which use bulk SMS resources, TRAI should penalise telecom operators who don’t report such infringement, and penalise/disconnect telemarketers who don’t. Penalties could be higher for stock related infringements.
- Clamp down on usage of transactional pipe for promotional messages: This is getting out of hand, there’s no effective complaints mechanism for reporting this issue. While this may not impact
3. For unregistered telemarketers:
- Monitor bulk purchases of SIM cards: If someone is buying hundreds of SIM cards (for which verification is necessary) for modem farms, there should be rules governing these purchases, with purpose of purchase noted.
- SMS limitation is tricky: In the past, the TRAI had put a limit on the number of SMS per day from subscribers. This was quashed by the TDSAT and an order putting a stay on this was issued by the Supreme Court. I’m not sure of the current status legal here, but this is best avoided.
- Increase SMS termination charges: In 2013, the TRAI had increased SMS termination charges to 2 paise per SMS for normal SMS and 5 paise for transactional SMS. One approach of tweaking the incentive structures would be to increase termination charges for normal SMS to push up SMS rates, and reduce termination charges for registered promotional marketers. This tricky but considering increasing termination charges for regular users and unregistered telemarketers, and reducing for registered telemarketers will incentivise switching.
Yes, it’s probably a lot easier to filter content on SMS, but it’s more important to ensure that a system that leads to censorship of legitimate content isn’t set up.