Three months back the Securities and Exchange Board of India (Sebi) issued an advisory cautioning investors to take informed investment decisions and not be lured by text messages advising them to invest in certain instruments and securities. The regulator also informed them to deal only with intermediaries that are registered with the regulator.
However, that is not something that investors are diligently following.
A recent order passed by Sebi against 37 individuals and entities related to SMS Techsoft Ltd reveals that investors fell prey to such messages sent by the group who colluded to cheat them by first manipulating and raising trade volumes of the share and then sending SMSs recommending investors to buy the scrip. In this way the group made profits of over Rs 6 crore for themselves in the period between March and October 2013.
Between February and March 2013, Sebi noticed a series of messages recommending investors to ‘Buy’ shares of SMS Techsoft Ltd at its ongoing price of Rs 0.45 and was giving a price target of Rs 5 for the scrip. Some messages even referred it as ‘Jackpot call’ as they were meant to lure retail investors.
One such message read, “BUY SMS TECHSOFT LTD (BSE 531838) Rs 0.45. TARGET Rs 5 + 9. BIG ORDER FROM BANKING + ATM TRANSACTION” – Senders’ Mobile No: +918608862368; +918015874386.”
Many investors, unaware that the recommendation SMS which popped up on their smartphones were juicy baits, entered the scrip and lost their money.
Retail investors were buying when these 28 entities were selling and the price fell by 85 per cent from Rs 0.6 per share in March 2013 to Rs 0.09 in October 2013.
Sebi on Tuesday passed an order restraining all 37 entities (including three promoters — V Jagadish, Anita Srinivasbhatt Kadsanthalai and Akash Jagadish Vital) involved in the fraud from accessing the securities market and also prohibited them from buying, selling or dealing in the securities market.
Sebi further directed all of them to deposit an amount Rs 6,00,11,512 which Sebi saw as ill-gotten money, into an escrow account within a period of 30 days.
The order also restrained SMS Techsoft from raising additional capital through securities market, either directly or indirectly.
How SMS Techsoft lured investors
A flurry of mobile SMSes recommending investors to buy SMS Techsoft stock led the regulator to investigate the matter and what it found was a long-drawn plan to manipulate the stock and cheat