There are increasing instances of bulk SMSes being sent to investors and the general public, inducing them to invest in or purchase the stocks of certain listed companies, indicating target prices and giving fraudulent and misleading or false information.
Under Sebi regulations, investment advice and stock tips can only be given by investment advisors and certain other entities that are duly registered with the regulator.
In a circular addressed to market participants, BSE has asked them "to exercise greater caution with respect to tips/ rumours circulated via various mediums while dealing in the securities listed on the exchange".
Trai and Sebi collaborated closely to review the existing regulatory framework and industry practices to help in reducing the vulnerability of the securities market to manipulation through misuse of mass communication devices like bulk SMSes.
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The collaboration came as Sebi sought attention of the Telecom Regulatory Authority of India (Trai) on the matter.
Accordingly, Trai directed service providers to ensure that only Sebi-registered brokers are allowed to send investment advice SMSes to their customers.
Capital markets regulator Sebi has taken action against some entities sending unsolicited stock tips in the past, while a few other such cases are under investigation.
However, it has been difficult for the regulator to check this menace as a large number of individuals and entities have been indulging in such practices, prompting Sebi to seek Trai's help.
Disclaimer: No Business Standard Journalist was involved in creation of this content