Sunday, June 18, 2017

How to check unsolicited advice on stocks

If you own a smartphone, it would be a big surprise if you don’t receive free share tips from unknown advisors.
“Multi-bagger Buy 2,000 shares of NSE-BSE Hubtown (Code 532799) buy above 150; SL 140; short-term target ₹180-190 expected ₹280 in one month,” says one message followed by “Buy 10,000 SFLINER (BSE Code 530867) at ₹41.10, intraday target 45.5, BTST 55, SL 45.70. 75+ in week.”
Another one reads “Buy 20,000 shares of Panafic (Code 538860) buy @6.47 SL 5.85, short-term target 10-14, expected ₹20 in one month.” “Upper Circuit call buy CTL BSE: 538476 at 15 short-term 10 days target 15”; Company declared 7.5 per cent dividend, FIIs and MFs buying,” touts another message.
These kinds of messages find their way frequently into the mobile phone inbox, whether or not the number is registered under the DND (Do Not Disturb) registry with the telecom operator. Rogue brokers/tipsters somehow manage to bypass those filters.
From fake identities
What is even more disturbing is that some of these messages are from fake identities that have similar-sounding names to big-name broking houses such as Kotak Securities, Emkay, Angel Broking, HDFC Securities and Motilal Oswal. Clearly, there are pump-and-dump operators at play, who would like to bid up obscure companies with poor fundamentals and allow current holders in the stock to exit at an inflated price.
So, how should one address these unwarranted messages? At the face value, one should simply ignore such messages.
SEBI, in December 2016, had issued an advisory on the subject saying that it had come to know that many entities have been luring investors through unsolicited calls/SMSs and assuring guaranteed profits on the trading tips provided by them and that “It is observed that this activity is carried out mostly by entities based in Madhya Pradesh and Gujarat.”
SEBI had cautioned investors to: “Deal with only SEBI-registered intermediaries and check their registration status on the SEBI website before availing the services; be wary of any misleading advertisements which solicit investments in securities market assuring guaranteed profits.”
SEBI’s advice is: “Take informed investment decision without being influenced by trading tips.”
Hard to identify
But without their complete identity at hand, it is not easy for investors to go to the SEBI site and check the registration of these brokers.
Instead, SEBI or the exchanges should have a provision on their websites in the form of a platform for investors to enter the phone numbers and IDs of such unscrupulous elements so that the regulator can initiate a probe against these intermediaries/brokers and, if found guilty, punish them.
The market regulator and intermediaries could also have a WhatsApp ID or exclusive mobile number where these messages and numbers could be forwarded in order to tighten the screws on such players.
(This article was published on June 16, 2017)

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