Market regulator Sebi is currently carrying out searches and raids at approximately 100 locations in Gujarat, according to sources from Businessworld. These operations are targeted at stock market operators allegedly engaged in illicit activities such as manipulating share prices and unlawfully offloading shares of small companies in the market. Sebi’s surveillance department officials are actively participating in these raids.
Operators have increasingly turned to WhatsApp groups and Telegram channels to disseminate ‘stock tips.’ Social media platforms like Facebook, YouTube, Reddit, and Instagram are also being utilized to attract investors and include them in WhatsApp groups. Investigators have uncovered a pattern where operators accumulate shares of lesser-known companies before selling them to retail investors through stock tips on WhatsApp groups.
Sources indicate that Sebi has identified circular trading and price manipulation in numerous small company shares amid the prevailing bullish market sentiment. On a daily basis, numerous small company stocks are reportedly reaching their upper circuit limits.
This marks the second raid within six months. In June, Sebi conducted raids on six entities linked to a prominent market operator for allegedly front-running trades by foreign portfolio investors (FPIs). Despite the initial raids, no significant regulatory actions were taken by Sebi, and the regulator’s subsequent slow approach raised questions.
During the June raids, five brokers in Kolkata and one in Mumbai were targeted by Sebi. The market operator allegedly orchestrating these entities has a history of severe regulatory actions and is known for using benami fronts for trading. Sebi supposedly possessed information and prima facie evidence indicating that these brokers and entities were front-running trades of major foreign portfolio investors.
After the June raids, Sebi went silent, and no further actions or investigations were observed. Typically, Sebi issues “Ex-Parte orders” promptly if the gathered information is grave, followed by a court-like hearing for involved parties at a later date. The lack of follow-up actions after the June raids left many experts perplexed.
