Sebi Issues Warning Against Trading Frauds Masquerading as FPIs

• ByStartupStory     |    February 27, 2024

The Securities and Exchange Board of India (Sebi) has issued a warning to investors regarding trading frauds perpetrated under the guise of Foreign Portfolio Investment (FPI) accounts. Sebi cautioned investors against fraudulent entities offering trading opportunities that mimic those available to foreign funds. “Posing as employees or affiliates of Sebi-registered FPIs, they coax individuals into downloading applications that purportedly allow them to purchase shares, subscribe to IPOs, and enjoy ‘institutional account benefits’, all without the need for an official trading or demat account,” Sebi stated in a release.

Fraudsters are employing various tactics to entice victims, including online trading courses, seminars, and mentorship programs conducted through messaging platforms like WhatsApp and Telegram, as well as live broadcasts. These entities falsely claim associations with Sebi-registered FPIs and promise stock trading for resident individuals through sub-accounts of foreign funds. “It is important for the public to understand that the FPI investment route is unavailable to resident Indians, with limited exceptions,” Sebi emphasized.

The regulator highlighted that direct access to the equities market requires investors to possess a trading and demat account with a Sebi-registered broker/trading member and Depository Participant (DP) respectively. Sebi reiterated that it has not granted any relaxations to FPIs regarding securities market investments by Indian investors. Investors are urged to exercise caution and avoid social media messages, WhatsApp groups, Telegram channels, or apps claiming to facilitate stock market access through FPIs or Foreign Institutional Investors (FIIs) registered with Sebi.

In light of the warning, Sebi’s advice underscores the necessity for investors to verify the legitimacy of trading opportunities and to refrain from engaging with suspicious entities offering unauthorized services. “Sebi has not granted any relaxations to FPIs regarding securities market investments by Indian investors,” the release emphasized, reiterating the importance of adhering to regulatory guidelines to safeguard investors’ interests.

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