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Sebi is enhancing surveillance and technology-driven measures to address rising pre-investment scams targeting India's growing retail investor base. Chairman Tuhin Kanta Pandey highlighted the increasing use of fake apps, WhatsApp groups, and promises of high returns to divert funds before investors interact with registered intermediaries. The regulator is promoting tools like SEBI Check, raising awareness through multilingual campaigns, and advocating disciplined long-term investment strategies. Technical glitches at MCX and NSDL were addressed responsibly, while PMS regulations and conflict of interest recommendations are under review to improve efficiency and investor protection.
The Securities and Exchange Board of India (Sebi) is intensifying surveillance and leveraging technology to combat pre-investment scams that divert funds before investors even engage with registered intermediaries. Sebi Chairman Tuhin Kanta Pandey, who recently completed a year at the helm, noted that a growing number of new investors are being misled through fake trading apps, WhatsApp groups, and promises of high returns, with funds often flowing directly to fraudsters accounts. Advertisement
Pandey emphasized that investor caution needs to go beyond awareness and translate into informed action, particularly as India's retail investor base expands. He explained that many individuals intending to enter the markets are hijacked by scamsters even before reaching a Sebi-registered intermediary, highlighting the prevalence of fake apps and digital channels used to lure unsuspecting investors.
The regulator has increased efforts to curb such frauds and safeguard investors money. Pandey highlighted tools such as SEBI Check, which allows users to verify the legitimacy of entities soliciting investments, and encouraged wider use of verified platforms and UPI handles to protect payments. He underlined that while these measures are not new, broader adoption remains crucial to tackling cyber fraud.
Sebi has launched multimedia and multilingual campaigns to raise awareness and prevent pre-investment scams. The chairman also called for disciplined investing, promoting long-term strategies such as Systematic Investment Plans (SIPs) and pooled investment vehicles, rather than speculative trading in complex instruments like derivatives, which many retail participants use without adequate understanding. He reiterated the importance of investor education and cautioned against unregistered finfluencers offering unrealistic returns.
On the regulatory technology front, Sebi continues to deploy AI and data-driven tools to monitor market misconduct, flag misleading content, and track unregistered advisories in real time as part of its broader investor protection framework. India currently has over 140 million unique investors.
Regarding the high-level committee on conflict of interest, Pandey said that while recommendations have been discussed in the board, further deliberations are needed before final decisions are taken. The committee, formed after Pandey assumed charge in 2025, submitted a report last November recommending disclosures by officials above the rank of chief general manager.
Addressing recent technical glitches at MCX and NSDL, Pandey noted that such incidents, while occasional, are expected given the complexity and interconnectivity of market infrastructure systems. He clarified that Sebi was kept informed throughout and closely monitored the developments, and that market participants acted responsibly to maintain operational continuity, using disaster recovery sites and contingency measures until stability was restored.
Pandey also differentiated Portfolio Management Services (PMS) from mutual funds, highlighting that PMS is a customized operation, unlike pooled mutual funds, and that current PMS regulations from 2020 are under review. He noted that investors shifting between portfolio managers currently need to open separate demat accounts, effectively selling and repurchasing securities, and Sebi is exploring ways to simplify and make the process more efficient. Concerns related to PMS returns and sales practices will be examined comprehensively.
For both the NSDL and MCX incidents, a root cause analysis is conducted within a defined timeframe, reviewed by the Technical Advisory Committee, and appropriate remedial measures are implemented. The regulator aims to minimise recurrence and strengthen safeguards by addressing systemic vulnerabilities.
Source PTI
FAQ
1. What are pre-investment scams, and why are they rising?
Pre-investment scams occur when fraudsters target potential investors even before they engage with registered intermediaries. Sebi Chairman Tuhin Kanta Pandey highlighted that fake trading apps, WhatsApp groups, and promises of high returns are increasingly used to mislead India's growing retail investor base, diverting funds directly to scam accounts.
2. How is Sebi addressing these scams?
Sebi is strengthening surveillance and deploying technology-driven measures, including AI and data-driven monitoring, to detect and flag misleading content in real time. It also promotes tools like SEBI Check to verify registered intermediaries, encourages use of verified platforms and UPI handles, and runs multilingual awareness campaigns to educate investors.
3. What investor guidance has Sebi provided?
Investors are advised to adopt disciplined long-term strategies, such as Systematic Investment Plans (SIPs) and pooled investment vehicles, rather than speculative trading in complex instruments. Sebi warns against following unregistered finfluencers offering unrealistic returns and emphasizes the importance of verifying intermediaries before investing.
4. How is Sebi handling technical issues in market infrastructure systems?
Recent glitches at MCX and NSDL were addressed through disaster recovery sites and contingency measures. Root cause analyses are conducted, reviewed by the Technical Advisory Committee, and remedial measures implemented to prevent recurrence while ensuring market continuity.
5. What developments are underway regarding Portfolio Management Services (PMS)?
Sebi is reviewing PMS regulations from 2020 to make processes more efficient. Currently, investors shifting between portfolio managers must open separate demat accounts, leading to additional buy-sell transactions. Sebi is exploring ways to simplify transfers and examining sales practices and returns comprehensively.
6. How many investors are affected or targeted by these scams?
India has over 140 million unique investors. A significant portion of new retail investors are at risk of pre-investment scams, particularly those entering markets without verifying intermediaries or understanding complex investment instruments.
7. What long-term impact does Sebi aim to achieve?
By combining technology, regulatory oversight, and investor education, Sebi aims to reduce pre-investment fraud, enhance market integrity, simplify investment processes, and strengthen safeguards across all investment platforms, ensuring greater investor protection and trust.
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