Market manipulators using dark web but Sebi now found a way to catch them
Market manipulators have hooked onto dark web and private chat groups on messaging apps like WhatsApp and Telegram for sharing ‘multibagger’ stock tips and unpublished price sensitive information about listed firms.
This has prompted the exchanges and the regulator to beef up the ‘whistleblower’ framework to encourage people, including investors and those working with various market intermediaries, to anonymously give a tip-off on such groups.
The shift to these platforms follow an enhanced vigil by the capital markets watchdog Sebi (Securities and Exchange Board of India) and the stock exchanges on social media platforms like Facebook and Twitter, while the regulator can also seek call data records from telecom firms for its probe.
According to multiple sources from the industry, regulatory authorities and exchanges, the manipulators often disguise the price sensitive information about listed firms as ‘heard on the street talks’, while stock tips are also shared as ‘multibaggers’ — a term used for multi-fold returns.
The two leading exchanges — BSE and NSE — have systems in place wherein anyone can submit a tip-off through a toll- free phone number, email or directly on their websites.
The tip-off can be shared by the whistleblower with or without sharing his or her details.
As it is difficult to track the dark web platforms and several new ‘secure’ messaging apps that keep propping up, the regulator and the exchanges are focussing on their surveillance systems to check any manipulative activities.
One proposal being considered include some kind of reward for them, an official said. However, this idea is at a very initial stage as of now, he added.
Once a tip-off is received, the exchanges can look into the trade history and forward the matter to Sebi if any suspected manipulation is noticed.
The markets watchdog can seek call data records (CDRs) of all the persons involved in alleged leak of unpublished price sensitive information, the official noted.
Sebi has powers to seek call data records, excluding the exact content of the communication, from telecom firms.
CDRs generally list out the number of conversations between two or more entities and are different from phone- tapping, where an agency can snoop on or record telephonic conversations of those suspected to be engaged in some wrong- doings.
Under Sebi rules, all the financial details of listed companies should be disseminated only through exchanges as they are considered price-sensitive.
These material news or rumour floating in the social media can have potential impact on the sentiments of investing population which can further impact price or volumes of securities traded on exchange platforms, officials said.
BSE and NSE have already implemented social media analytics using artificial intelligence to track rumours and news reports on various web platforms including Twitter and Facebook about listed companies and their impact on the stock prices.
Alerts generated by social media solutions are closely monitored by the exchanges and are passed on to surveillance teams for any material information.
Meanwhile, Sebi and exchanges have already started examining trade details of over two dozen firms, including several listed blue-chip firms, as part of a probe into alleged leak of key financial details of these companies through WhatsApp.
The exchanges are analysing the trade data of the last 12 months of such companies in order to detect any possible breach of norms while Sebi is taking the help of data warehouse and its intelligence systems.
While the regulator has already taken action in several such cases so far, it is investigating a number of others involving similar activities, the official said.
The regulator has already taken action against several entities for providing investment advice without registration. These included MCX Biz Solutions, Moneyworld Research and Advisory, Global Mount Money Research and Advisory, GoCapital, CapitalVia Global Research and one Imtiyaz Hanif Khanda and his maternal uncle Vali Mamad Habib Ghaniwala.
Besides, Sebi has stepped up its investor awareness campaign on these issues. Further, Sebi, in August, had got the help from telecom regulator Trai to curb fraudulent bulk SMSes that entrap gullible investors with stock tips promising huge financial gains.
Last year, Sebi had floated a consultation paper to ban unauthorised trading tips through SMSes, WhatsApp, Twitter, Facebook and other social media platforms, as also games, competitions and leagues relating to the securities market.
However, the regulator is yet to put in place a final regulation in this regard.