SEBI has banned multiple unregistered "finfluencers" from the stock market in a landmark order. The entities were running a "pump-and-dump" racket on social media, artificially inflating stock prices before dumping them for massive profits.
Securities and Exchange Board of India on Friday issued a landmark interim order banning multiple unregistered "finfluencers" and entities from the stock market for running a "pump-and-dump" manipulation racket on social media.
Modus Operandi of the Racket
According to the SEBI order, the operators bought small/mid-cap stocks, artificially inflated prices by sharing unsubstantiated bullish tips to followers, and then dumped their shares at a massive profit, leaving retail investors with heavy losses. The action followed unauthorised and misleading market recommendations broadcast on prominent social media platforms.
As part of efforts to protect retail investors, the market regulator has restrained the entities and individuals involved from accessing the securities market. Among the key operators named in the regulatory crackdown are some social media influencers and unregistered investment advisors. These individuals leveraged platforms like Telegram and WhatsApp to artificially inflate trading volumes and prices in specific corporate scrips. The action marks an aggressive push by SEBI to curtail the rising threat of "finfluencer"- driven market misconduct.
SEBI's Stance on Market Integrity
In its interim order, SEBI highlighted the systemic danger posed by such digital manipulation loops. "The utilisation of social media platforms to broadcast distorted or fabricated stock recommendations to a vast audience not only subverts the integrity of the market but severely damages retail investor confidence," the order said.
"Such deceptive practices create an artificial marketplace, and the regulator will take stringent, preemptive action to neutralise these entities before greater harm is inflicted on the financial ecosystem," it added.
Immediate Penalties and Investigation
Alongside market bans, the regulator has ordered the immediate freezing of the bank accounts associated with the perpetrators. It has also mandated the impounding of all unlawful gains accumulated through the fraudulent trades.
SEBI has granted the barred individuals 21 days to file their objections or seek a personal hearing. The regulator said that further deep-dive forensic investigations into the network's financial trails are actively underway. (ANI)
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