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Daily News Analysis » February 2024 » SEBI Warns Against New FPI Fraud: 27 Feb, 2024

SEBI Warns Against New FPI Fraud: 27 Feb, 2024

SEBI has issued a warning about fraudulent trading platforms that falsely claim to have affiliations with its registered Foreign Portfolio Investors (FPIs).

Table of Content

Why in News:

  • SEBI has issued a warning about fraudulent trading platforms that falsely claim to have affiliations with its registered Foreign Portfolio Investors (FPIs).

FPIs:

  • FPIs are investors with a short-term perspective on companies, distinguishing them from Foreign Direct Investors (FDI) who engage in long-term investments.
  • FPIs typically operate through stock markets, quickly entering and exiting stocks, reflecting their short-term investment strategy.
  • Portfolio investment by any single investor or investor group is capped at 10% of the equity of an Indian company. Any investment beyond this threshold is classified as FDI.

Modus Operandi of Fraud:

  • Fraudsters are attracting victims through online trading courses, seminars, and mentorship programs, exploiting social media and live broadcasts.
  • They impersonate employees or affiliates of SEBI-registered FPIs, misleading individuals to download fake apps for trading and IPO subscriptions.

SEBI’s Clarification:

  • SEBI clarified that FPI investment routes are not available to Indian resident, except in limited scenarios as per SEBI (Foreign Portfolio Investors) Regulations, 2019.
  • No ‘Institutional Account’ exists for direct equities market access, requiring a SEBI-registered broker/trading member and depository participant (DP) for trading and Demat accounts.
  • No relaxations have been granted by SEBI for Indian investors to invest in securities markets through FPIs.

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