SEBI bars 135 entities from markets. What is the bulk SMSs scam?

Well, allegedly, these entities had been indulged in circulating "buy recommendations" in the scrips of these companies by means of bulk SMSs, text messages, websites to investors, and more. This led to a fast increase in price and volume in the scrips of companies. 

Not only this, but SEBI also posed a fine of Rs 126 crores on these entities. SEBI has been keen on taking disciplinary action against influencers and entities that are indulged in manipulating the share prices of companies by bringing forward recommendations on multiple social media channels to investors.

The Bulk SMSs Scam- EXPLAINED

An investigation had been started by the markets regulator in trading scrips of small-cap companies, namely, 7NR Retail lTD., GBL Industries Ltd., Mauria Udyog Ltd., Vishal Fabrics Ltd., and Darjeeling Ropeway Company Ltd. This investigation on these 5 small-cap companies had been done after it saw a surprisingly sharp increase in their trading volume and share prices.

SEBI found out in the investigation that there were certainly some robust similarities in the trading pattern that these five scrips had been following. One similarity was that “buy recommendations” for all 5 scrips were largely circulated via bulk SMSs. Some websites had also been made to use for suggesting buying in all five scrips, other than Vishal Fabrics Ltd.

Plus, another observation that was made was that the SMS circulation period aligned with a rise in prices and volumes of the companies’ shares. Yet, it is worth noting that in the situation of Darjeeling Ropeway, the price rise stayed under control and only the volume increased. This was due to some specific surveillance actions imposed by the stock exchange on the scrip.

In the investigation, SEBI observed that a few identified entities allegedly indulged in various fraudulent acts leading to abnormal increases in the prices and volumes of the shares of these above-mentioned five companies.

The regulator observed that a total of 135 entities actually indulged in stock manipulation. These companies wrongfully acquired Rs 126 crores by being a part of illegal activities. SEBI then barred these entities from having access to the securities market.

Not to miss, the markets regulator issued 226 entities a show cause notice, which included multiple mule accounts. It also hinted at a probable need for the disgorgement of a total of Rs 143.79 crores from the 226 entities.