SEBI Wants Ban on Market Tips Via SMSes, Emails & Prohibition on Stock Trading Games, Tournaments

It is said that stock market is a game wherein money is passed on from the impatient to the patient.

And there are numerous ways to influence/persuade or mis-direct the impatient to part with his/her money, and influence stock buying decisions in the wrong way. The Securities Exchange Bureau of India (SEBI) has expressed it’s displeasure over such tactics to influence the fragile stock market, and have decided to take strict action against it.

A new consultation paper has been floated by SEBI, wherein they have suggested to ban en-masse circulation of ‘free’ stock market tips and insider news to gullible investors. Besides, they have also planned to ban games, contests and tournaments based on the volatility of stock market.

Once the resolution is passed circulating such tips and news related with stock market may be declared as a crime under SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.

The circular said, “Restriction on providing trading tips via bulk SMS, email, etc. and restriction on soliciting investors by offering schemes/competitions/games/leagues/etc. related to securities market and covering these activities under the advertisement code as well as under SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.”

Right now, there are hundreds of unauthorized trading consulting companies, which provide unsolicited advice on stocks and give free recommendations to investors.

Often, such tips and news are circulated via mass SMSes and emails to a list of all investors. Often, this is done to entice them, and convert them as paid customers of their consultation; but most of the times, this is done to influence buying or selling of a particular stock.

Once SEBI’s regulations are in force, these unofficial consultants need to shut their shops, else face legal action.

Stock Market Games, Contests May Be Banned

Stock market games, tournaments and contests is a huge market in India right now, wherein prizes worth lakhs of rupees are offered. For instance, Kapil Dev endorsed Indian Trading League is one such platform, with a huge following. They charge Rs 25,000 per person to participate in the games, and claims to offer cash prizes worth Rs 1.5 crore for correctly guessing the stock market movement and prices of shares.

Stock Race is another such provider of stock market games, and claims to provide Mercedes Benz and other such prizes.

Once SEBI’s new regulations are in place, such games and contests, which are essentially pure gamble, would be banned in India.

SEBI has strictly said in their circular: “Participation in such schemes including sharing of confidential and personal trading data is at investors’ own risk, cost and consequences as such schemes are neither approved nor endorsed by SEBI / SEBI recognized Exchange(s)”

Is SEBI correct in banning stock market related games and contests; and in stopping mass circulation of trading tips and news? If you are an investor, then do share your views by commenting right here!