The Securities and Exchange Board of India has formed a team for search and seizure operations. The move comes as the regulator is preparing a crackdown against the circulation of illegal market tips over social media platforms such as WhatsApp and Telegram, said people with knowledge of the matter.
Mumbai: The Securities and Exchange Board of India (Sebi) has formed a team for search and seizure operations. The move comes as the regulator is preparing a crackdown against the circulation of illegal market tips over social media platforms such as WhatsApp and Telegram, said people with knowledge of the matter.
Last week’s raids by Sebi in Ahmedabad and Mehsana were facilitated by this new team, said the people cited above. These raids were made in connection with the circulation of illegal and fake tips over Telegram, they said.
The nature of social media implies that the source of wrongdoing isn’t confined to the big cities. Several pan-India social media groups have participants and moderators across the country, said the people cited above. On the other hand, if Sebi wants to raid a broker or a listed company, it just needs to cover only one or two key offices of the market entity.
Sebi didn’t respond to queries.
“These raids have to be more elaborate – like the ones that are undertaken by enforcement and tax agencies,” said one of the persons. “Digital evidence is key in these cases and hence one has to ensure that electronic devices like laptops and mobile phones are seized through proper procedure.”
The team coordinates with various local law enforcement agencies and the judiciary. For instance, local police stations will be notified to provide security for Sebi officials. Also, any seizure being made in terms of personal property such as mobile phones will need court warrants.
“Social media platforms like WhatsApp don’t share their user-specific information with the regulators and hence the only way to gather evidence regarding social media groups is by seizing the phones of accused and then retrieving the data from the handset,” said another person. “The team is also working with the Big Four consultants to develop a machine-learning platform that would help Sebi comb through the relevant information easily.”
The regulator was given search and seizure powers by the government in 2014. They haven’t been used frequently. Before the operation last week, the last time Sebi conducted a large-scale raid was in 2017 in the so-called WhatsApp leaks case, said the people cited above. Sebi had received information that certain WhatsApp groups were getting access to the earnings of top listed companies before they were being made public. The regulator cracked down on two such social media groups and raided the premises of leading brokerage employees.
Legal experts say the 2017 raids were a learning experience for Sebi. “Some of the phones were fully scrubbed before the raid could even happen, leaving little evidence behind,” said a former regulatory official.
The bull run in Indian equities has caught the fancy of several retail investors in the recent past, leading to a steady increase in new demat accounts being opened. This retail frenzy has spread across social media, where dedicated groups operate, sharing market information. However, not everything being shared on these groups is accurate and some less-informed investors are falling prey to this, said the former official cited above.
Some of the groups are even learnt to be charging entry fees of ₹10,000 to ₹1 lakh, promising members access to exclusive tips and trading guidance.