Sebi warns investors against 'unscrupulous entities' promising high returns

The market regulator has warned investors against “unscrupulous entities” claiming to be registered organisations and promising high returns, responding to people being duped by fake money managers.

Increasingly, frauds are using sophisticated techniques to dupe even well-educated investors. With the markets soaring new highs, many investors have fallen for such schemes to make a quick buck.

The Securities and Exchange Board of India (Sebi) has urged investors to conduct due diligence, verify registration, be cautious of investments promising high returns, and check for enforcement action against such entities before giving their money.

“It is imperative for investors to 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,” said Sebi.

The regulator said it has observed a rising trend of “unscrupulous entities” and online platforms falsely claiming to be registered with Sebi.

"These entities often entice the general public by showcasing fake certificates purportedly issued by Sebi and promising or implying assured, high returns on investments," it said.

The regulator has been acting against unregistered investment advisory and portfolio managers. It has taken action against financial influencers found to be indulging in manipulation, and promising high income by their stock tips and strategies without registering, and collecting fees for such tips.

In 2022-23, Sebi took action against 231 entities for breaking investment advisor regulations and passed 23 final orders for such violations. It passed two orders for violation of portfolio management service norms.

Stock exchanges have warned investors against dabba trading, stock tipping, and those promising guaranteed returns. The National Stock Exchange has deployed 'mystery shopping agencies' to crack down on such practices.

There have even been cases of investors sharing user IDs and passwords relying on unsolicited messages circulating on social media and chat groups, and based on recommendations over phone calls.