Sebi Raids On Stock Market Operators At 100 Premises

Market regulator Sebi is conducting raids and searches at around 100 premises in Gujarat, sources told Businessworld. The raids were being conducted against stock market operators who are involved in share price rigging and offloading of small company shares in the market in an illegal manner, the sources said. Officials from Sebi's surveillance department were also part of the raid, the sources said.

WhatsApp groups and telegram channels are the preferred mode of operators to give 'stock tips' these days. The operators are using social media platforms like Facebook, YouTube, Reddit, and Instagram to lure investors and add them to their WhatsApp groups. First, the operators stock up on shares of little-known company shares and then offload them to the retail investors through stock tips on WhatsApp groups, investigators have discovered.

Sources said that Sebi has come across circular trading and price rigging in many small company shares on the back of the current bullish sentiment. On a daily basis there are tens of small company stocks that are hitting upper-circuit

Second raid in six months
In June, Sebi had raided six entities connected to a large market operator for front-running the trades of foreign portfolio investors (FPIs). However, no major action was followed by Sebi in terms of issuing orders. Sources said that the regulator went slow after the initial raids in June and no reasons were given by the regulator for the same.

Among those raided by Sebi in June, five brokers were from Kolkata and one was from Mumbai. The market operator who Sebi believed was behind the entities has faced severe action from the regulator in the past and is known to use benami fronts to trade in the market, the sources said. It is learned that Sebi had information and prima facie evidence that these brokers and entities were front-running the trade of large foreign portfolio investors (FPIs), the sources said.

Sebi went silent after the previous raids
Raids were conducted by Sebi on multiple locations in Mumbai and Kolkata on June 15 and June 18 after its internal surveillance system started throwing up data on patterns of some entities front-running the trades of US-based FPIs since 2022. But the follow-up action and the investigations of the trial went cold. Usually, Sebi passes "Ex-Parte orders" before or after the raids without any delay, if the information gathered is of grave nature against entities involved in the racket.  A court-like hearing for the parties is held at a later date. But no follow-up action was seen from Sebi's side after it conducted raids in June, which was confusing for many experts.