Well, supposedly, these entities had allowed themselves to circulate “purchase recommendations” on the vouchers of these companies through bulk SMS, text messages, investor websites and more. This caused a rapid increase in the price and volume of corporate bonds.
Not only this, SEBI also imposed a fine of Rs 126 crore on these entities. SEBI has been keen to take disciplinary action against influencers and entities who are engaged in manipulating share prices of companies by presenting recommendations on multiple social media channels to investors.
The Bulk SMS Scam: EXPLAINED
The markets regulator had launched an investigation into trading in securities of small cap companies namely 7NR Retail lTD., GBL Industries Ltd., Mauria Udyog Ltd., Vishal Fabrics Ltd. and Darjeeling Ropeway Company Ltd. This probe About these five small-cap companies were removed after they saw a surprisingly sharp rise in their trading volume and share prices.
SEBI found in the investigation that there were certainly some strong similarities in the trading pattern that these five bonds had followed. One similarity was that the “purchase recommendations” for all 5 scripts were largely circulated via bulk SMS. Some websites have also been used to suggest purchasing the five vouchers, apart from Vishal Fabrics Ltd.
Furthermore, another observation that was made was that the period of SMS circulation aligned with an increase in the companies’ share prices and volumes. However, it is worth noting that in the Darjeeling Ropeway situation, the price increase was kept under control and only the volume increased. This was due to some specific surveillance actions imposed by the stock exchange on the bonds.
In the investigation, SEBI observed that some identified entities allegedly committed various fraudulent acts leading to abnormal increases in share prices and volumes of the above five companies.
The regulator observed that a total of 135 entities actually manipulated their actions. These companies wrongfully acquired Rs 126 crore by being part of illegal activities. Subsequently, SEBI banned these entities from accessing the securities market.
Not to be missed, the markets regulator issued 226 entities a show cause notice, which included multiple mule accounts. He also hinted at a probable need for refund of a total of Rs 143.79 crore from the 226 entities.