Sebi to crack whip on illegal investment schemes on Internet

These include traditional businesses like retail,real estate and bullion,as also new-age business ideas like carbon credits and renewable energy,while guaranteed returns are being promised after eventual listing of such ventures.

Certain traditional-looking investment schemes are also being promoted through Internet by entities suspected to be linked to those already having faced regulatory action by the Securities and Exchange Board of India (Sebi),sources said.

Some of the barred entities,including a large player engaged in a long-running regulatory battle,are suspected to have taken to the credit cooperative society route to garner money from the gullible investors with promise to double their money in a few years,they added.

To avoid regulatory glare,the operators of these schemes,possibly being run through front entities,are not using the traditional modes to promote their business and are mostly using closed member groups on websites,blogs and social networking media platforms.

However,Sebi has received numerous complaints about such schemes and has begun looking into the matter through its own technical systems to track the Internet and social media platforms,as also through use of its newly granted powers.

SMSes and emails are also being used in a big way to promote such fraudulent schemes and products,but many of these messages and mails have found their way to the regulatory and enforcement agencies.

While the unauthorised credit cooperative schemes,having a size of Rs 100 crore or more,can be probed under Sebi’s Collective Investment Scheme regulations,the entities promising unrealistic returns and offering “sure-shot” investment tips can face action under the Prevention of Fraudulent and Unfair Trade Practices Regulations.

After its initial investigations,Sebi may seek information from other entities,including the host of the websites and social media platforms,as it has been now allowed to seek information from any entity in relation to its probes.

Using these powers,Sebi recently cracked down on entities running an SMS-based investment tips scam by collecting information from banks and the telecom service providers,among others.

Sebi swung into action last month after it noticed that certain entities were offering intra-day tips and stock advisory services through SMSs via mobile phones with promise of Rs 5,000-75,000 daily returns.

After noticing these messages,Sebi began its investigation and obtained details of the call data records of the telephone numbers used for sending such SMSes. Thereafter,Sebi conducted a surprise visit on the premises of the suspected entities and also collected their bank account details to nail the culprits.

This is the first major case where Sebi has used its newly granted powers to access call data records of suspected persons,which it has got through changes made in the regulations governing the securities markets through an Ordinance.

Besides,Sebi has also got powers to conduct search and seizure operations,among others.