What is the new FPI fraud SEBI has warned investors against
- The markets regulator Securities and Exchange Board of India (SEBI) has warned individuals against fraudulent trading platforms falsely claiming or suggesting affiliation with its registered Foreign Portfolio Investors (FPIs).
- These platforms are misleading individuals by claiming to offer them trading opportunities through FPI or Foreign Institutional Investor (FII) sub-accounts or institutional accounts with special privileges.
What is the modus operandi?
- The SEBI said it has received many complaints where fraudsters are enticing victims through online trading courses, seminars, and mentorship programmes
- In the stock market, leveraging social media platforms like WhatsApp or Telegram, as well as live broadcasts.
- These scamsters are posing as employees or affiliates of SEBI-registered FPIs, and coaxing 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.
- These operations often use mobile numbers registered under false names to orchestrate the fraudulent schemes, SEBI, said.
What has SEBI clarified?
- The market regulator clarified that the FPI investment route is unavailable to resident Indians, with limited exceptions as outlined in the SEBI (Foreign Portfolio Investors) Regulations, 2019.
- “There is no provision for an ‘Institutional Account’ in trading and direct access to the equities market requires investors to have a trading and Demat account
- With a SEBI-registered broker/trading member and depository participant (DP) respectively,” the regulator said.
- SEBI has not granted any relaxations to FPIs regarding securities market investments by Indian investors
Foreign Portfolio Investors
- Foreign portfolio investment (FPI) consists of securities and other financial assets passively held by foreign investors.
- It does not provide the investor with direct ownership of financial assets and is relatively liquid depending on the volatility of the market.
- Examples of FPIs include stocks, bonds, mutual funds, exchange traded funds, American Depositary Receipts (ADRs), and Global Depositary Receipts (GDRs).
- FPI is part of a country’s capital account and is shown on its Balance of Payments (BOP).
- The BOP measures the amount of money flowing from one country to other countries over one monetary year.
- The Securities and Exchange Board of India (SEBI) brought new FPI Regulations, 2019, replacing the erstwhile FPI Regulations of 2014.
What should investors do to stay safe?
- SEBI has urged investors to exercise caution and to steer clear of any social media messages, WhatsApp groups, Telegram channels, or apps
- claiming to facilitate stock market access through FPIs or FIIs registered with SEBI.
- Such schemes are fraudulent and do not have SEBI’s endorsement, the regulator said.