The Securities and Exchange Board of India (Sebi) on February 13, 2024, issued a stern warning to investors regarding the proliferation of unregistered entities and online platforms falsely claiming themselves as Sebi intermediaries. "The Securities and Exchange Board of India (Sebi) has observed a rising trend of unscrupulous entities and online platforms that falsely claim to be registered with SEBI as intermediaries," a Sebi release said.
They employ deceptive tactics such as showing fake certificates purportedly issued by Sebi also promising high returns. "These entities often entice the general public by showcasing fake certificates purportedly issued by SEBI and promising or implying assured, high returns on investments. SEBI hereby cautions investors against placing their money with any entity based on such claims," the release said.
SEBI cautioned the public against entrusting their funds to these entities or any entities solely based on such claims. Investors are urged to conduct due diligence and verify the registration status of any entity claiming to be a SEBI-registered intermediary. Investors must understand that investments offering high returns usually involve high risk including fraud risk and there can be no guarantees of assured returns in the securities market, it said.
To safeguard investors' interests, Sebi lists a series of precautionary measures:
Verify Before Investing: Investors are advised to verify the registration status of any investment service provider on Sebi's official website. On (www.sebi.gov.in) investors can follow the below path → sebi.gov.in→Intermediaries / Market Infrastructure Institutions →Recognised Intermediaries.
Exercise Caution Against Promises of High Returns: Investors should exercise caution of any entity that promises assured or exceptionally high returns. The principle of 'higher returns come with higher risks of losing your money altogether’ holds in the securities market, Sebi reminded.
Check Sebi's Enforcement Actions Against Entities: Investors are encouraged to check if there were any enforcement actions taken by Sebi against their chosen entities or intermediaries. The details of any enforcement action taken by SEBI against any entity/ intermediary are available on the SEBI website on the following path →sebi.gov.in→Enforcement →Orders.
Improve Market Knowledge: Last but not least, Sebi urged investors to empower themselves with knowledge about the securities market for a safer investment journey. Comprehensive resources and investor education materials can be found on Sebi's website link investor.sebi.gov.in.
Investors opting for unregistered entities risk losing SEBI's protection schemes. They can't register cases, access dispute resolution mechanisms, or seek redress via the SCORES portal. Losses aren't recoverable from the Investor Protection Fund (IPF).
If any retail investor chooses to invest in entities that are not registered members of Sebi, they lose help from Sebi’s investor protection schemes. A case cannot be registered with Sebi, against such entities.
The investors cannot access the dispute resolution mechanism of Sebi, where a dispute between a listed firm and a shareholder can be resolved with the help of Sebi. Investors cannot seek redress from the Sebi complaint redressal system (SCORES) portal, which is a complaint registering portal run by the market regulator. Also, they can't claim funds from the investor protection fund (IPF), in case of loss of funds.
