Sebi Warns Investors Of FPI Fraud Scheme; Learn Details

Sebi got numerous complaints of fraudsters enticing victims through online trading courses, offering them an FPI-investment route through institutional accounts. Read all about the scam.
Sebi Warns Investors Of FPI Fraud Scheme
Sebi Warns Investors Of FPI Fraud Scheme

Capital markets regulator Securities and Exchange Board of India (Sebi) on February 26, 2024, warned people against fraudulent trading platforms falsely claiming affiliation with Sebi-registered Foreign Portfolio Investors (FPIs).

These trading platforms mislead individuals by claiming to offer them trading opportunities through FPI or Foreign Institutional Investor (FII) sub-accounts or institutional accounts with special privileges.

Modus Operandi

Sebi said it received many complaints in which fraudsters are enticing victims through online trading courses, seminars, and mentorship programmes in the stock market, leveraging social media platforms like WhatsApp or Telegram, as well as live broadcasts, where they pose as affiliates of Sebi-registered FPIs.

These perpetrators pose as employees or affiliates of SEBI-registered FPIs and coax individuals into downloading applications that they claim will allow investors to purchase shares, subscribe to IPOs, and enjoy ‘institutional account benefits’—without needing an official trading or Demat account.

Sebi found that these operations often use mobile numbers registered under false names to orchestrate fraudulent schemes.

Sebi’s Clarification

The market regulator clarified that the FPI investment route is unavailable to resident Indians, with limited exceptions outlined in the SEBI (Foreign Portfolio Investors) Regulations, 2019.

The FPI route is a type of investment that allows the investor to hold assets such as bonds, stocks, money market funds, etc., in a foreign country. An FPI cannot have more than 10 per cent in a listed company in India, but this route is not available to residents of India.

“There is no provision for an ‘Institutional Account’ in trading, and direct access to the equities market requires investors to have a trading and Demat account with a SEBI-registered broker/trading member and depository participant (DP), respectively,” the regulator said. Sebi has not granted any relaxations to FPIs regarding securities market investments by Indian investors, the market regulator clarified.

Precautions To Take

SEBI has urged investors to exercise caution and avoid social media messages, WhatsApp groups, Telegram channels, or apps claiming to facilitate stock market access through FPIs or FIIs registered with SEBI. Such schemes are fraudulent and do not have SEBI’s endorsement, the regulator said.

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