Stockbrokers are cautioning investors about the increasing issue of fake WhatsApp groups that offer investment advice while impersonating registered entities. Market experts say these groups entice investors by promising unrealistic returns and pretending to be legitimate brokers with insider information. This has caused alarm among regulators, as it feeds into the fear of missing out (FOMO) among retail investors.
The National Stock Exchange (NSE), the largest stock exchange in India, recently alerted investors about a WhatsApp group named “JO HAMBRO,” which was luring retail investors with claims of providing discounted shares after the market closed.
The latest warning comes from SMC Global Securities Ltd, which published an advertisement listing nearly 70 WhatsApp groups and over 500 phone numbers that it claims belong to the admins of these fraudulent groups. “Recently, it has come to our notice that a whole lot of community has been formed who impersonate SMC, claiming to be our core management to propagate their malicious agenda of scamming unaware customers,” the notice stated.
Ajay Garg, the chief executive of SMC Global Securities, explained that these scammers are falsely promising returns of two to three times on stock investments and are even using fake Sebi certificates to appear as registered brokers. “In the past seven to eight months, we found 300-400 WhatsApp groups operating under the name of SMC Global Securities, with 500 numbers acting as admins in these groups,” Garg added.
SMC became aware of this issue through complaints from investors who were duped by these impersonators. The brokerage has approached Sebi and the exchanges for help, leading them to file First Information Reports (FIRs). Garg noted that the scammers operate like an organized gang; if any member raised an alert, the admins would quickly remove everyone from the WhatsApp group.
Mint attempted to contact at least 50 of the numbers listed in the advertisement. Most of these numbers were out of service, and one person who answered claimed he was unaware of any WhatsApp group.
The Securities and Exchange Board of India (Sebi), the market regulator, has received complaints about various entities fraudulently pretending to be Sebi-registered intermediaries. These impostors attempt to deceive investors through social media platforms and apps by asking for funds to purchase securities. According to information presented in the Rajya Sabha on July 20, Sebi flagged 8,890 instances of unlawful or misleading content related to the securities market to social media platforms for legal action.
On July 23, Alankit Ltd, a fintech services provider, informed the stock exchanges about deceptive WhatsApp groups impersonating the company and its affiliated firms. These groups were providing stock recommendations and unsolicited investment advice by misusing the company’s name and registered trademark. One of the messages circulating in these groups promised a “30% weekly return” to potential investors.
A spokesperson for Alankit stated that, in addition to launching public awareness campaigns, they have filed a formal complaint with the cyber cell department to take action against the fraudsters. “Amid a rising tide of WhatsApp scams, Alankit is taking decisive action to protect its reputation and restore investor confidence. Fraudsters are using the platform to target unsuspecting individuals with false promises of high returns and guaranteed profits,” the spokesperson added.
According to Ashish Rathi, a full-time director at HDFC Securities, these fake WhatsApp groups give the impression that investors can make large sums of money by only paying a small amount. They claim to have insider information and access to news that is not available to the public yet. For a small payment, individuals are led to believe they will gain access to valuable information that will help them make quick profits.
“This is really harmful because it creates the impression that making money is easy and that a big institution supports it, which makes it seem authentic,” Rathi explained. He also noted that such impersonation poses a significant risk to the reputation of genuine stockbrokers.
Brokerages are concerned about losing the trust of investors. Shripal Shah, managing director and chief executive of Kotak Securities, stated that even leading stockbroking firms have not been spared from this issue. “Such impersonation and frauds cause irreparable business and reputation loss not only to the stockbrokers being impersonated but also pose a systemic risk to the entire market and economy,” he added.
Legal experts suggest that the issue of fake WhatsApp groups could be addressed using the law against identity theft under Section 66C of the Information Technology Act. “From a regulatory perspective, it is the responsibility of Sebi to instruct all registered stockbrokers to maintain a publicly available list of all their communication channels. This would allow investors to quickly verify the authenticity of any WhatsApp group against such a list,” said Deepika Kumari, a partner at King Stubb & Kasiva, Advocates and Attorneys.
As the equity market continues to rise, the possibility of generating quick returns makes retail investors particularly vulnerable. “Everyone seems to want a piece of the great Indian equity rally, and most want it fast. This greed leads to FOMO, making investors more susceptible to scams,” explained Nirav Karkera, head of research at Wealthtech company Fisdom. “The current frenzy is a golden opportunity for those with bad intentions to take advantage of gullible investors.”
Karkera emphasized that this problem is not limited to stock markets. “Today, impersonation in the digital space has become quite common, with imposters trying to deceive unsuspecting people through easily accessible channels like social media and messaging applications,” he noted. “This is happening across various levels, affecting a wide array of brokers and other financial intermediaries.”
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