No time to read a Sebi order? Just check the video instead

That technology features right at the top of the capital markets regulator Securities and Exchange Board of India’s (Sebi’s) list of priorities is widely known by now. 

Sebi Chairperson Madhabi Puri Buch, the first female chief of the regulatory body, has repeatedly stressed the importance of technology and data and how the combination of these two elements has formed the basis of every decision taken by the regulator. While the capital market watchdog has been harnessing technology and data analytics to strengthen its investigation to build a foolproof case, most of the work was happening at the backend.  

Now, the regulator seems to have taken a step forward in its attempt to make investors aware of some means used by wrongdoers, so that gullible investors are not taken for a ride easily. 

On Wednesday, attached with an interim order/show-cause notice in a matter related to market manipulation of shares of five small-cap companies through bulk SMSs was a video explaining the modus operandi of the scheme. Interestingly, one could access the video by scanning a QR code included in the release though there was a hyperlink as well. 

What’s the big deal, one may ask. But small steps such as this could spark a leap in investor empowerment. This is because one may not have the time, patience or energy to go through a 300-page order. So, a video link explaining how the violators cheated the investors will help investors avoid such traps in future. 

In this case, Sebi conducted an investigation into alleged manipulation of shares of five companies—Mauria Udyog, 7NR Retail, Darjeeling Ropeway Company, GBL Industries, and Vishal Fabrics.  

Based on its findings, Sebi issued interim directions restraining 135 entities from accessing the securities market till further orders and also issued impounding orders for approximately Rs 126 crore towards wrongful gains made by the entities by indulging in such market manipulations. 

The modus operandi was actually simple and one that has been tried and tested many times in the past.  In the first leg, there was a set of entities that increased the price and volume of shares of the target companies through inter se manipulative trades. That was followed by bulk SMSs with ‘buy’ recommendations to lure public investors who would see the recent rise in price and volume and believe that there is genuine scope for further upside. 

In the last leg of the scheme, entities who have already bought shares in the first stage start offloading them at elevated prices. More importantly, the profits were transferred “through multiple layers and conduits to the Ultimate Beneficiaries of the scheme who were identified as Promoters of some of the companies,” as per the Sebi order. 

In this case, an individual named Hanif Shekh, who also sent the bulk SMSs, was identified as the mastermind of the scheme. 

While Sebi has explained the whole modus operandi in detail in its lengthy order, it has embedded a 22-second video explaining the whole scheme and the illegal gains made in each of the stock in the most simple and easy-to-understand manner. 

 

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