The growth of multiple forms of communication like social media sites, mobile messaging apps, and dedicated websites and internet groups has further posed challenges in the path of Indian market regulator, Securities and Exchange Board of India (SEBI).

As reported by the Indian Express, SEBI has come across many investment schemes being promoted through Facebook, Twitter, LinkedIn, WhatsApp, internet groups and others, many of which are fraudulent schemes luring investors with a promise of huge returns. SEBI has enhanced its surveillance procedures to keep a check on such fraudulent schemes.

SEBI social media

These are traditional businesses like retail, real estate and bullion, as also business ideas like movies, music albums, carbon credits and renewable energy, with offers like ‘double your money’ schemes in 2-6 years, sure-shot ‘inside information’ investment tips, astrological stock market predictions, attractive portfolio management services, and partnerships in future big business ideas.

Apart from such schemes, crowdfunding activities will also be under the scanner. A popular method to raise funds for small ventures through social media or websites, crowdfunding has been well adopted all over the world involving small contributions from a large number of people. Last week, the US markets regulator SEC proposed new rules to permit companies to offer and sell securities through crowdfunding, while the UK’s Financial Conduct Authority (FCA) also made plans to regulate crowdfunding.

Here in India, the concept is catching up fast and is posing a danger at the same time as very soon these funds could scale up. Many money laundering schemes might run in the name of crowdfunding via social media, pushing SEBI to set up a regulatory framework if it is found that such platforms involve large amounts of money or issuance of securities.

A discussion is on to find a nodal agency for such activities following a talk with various stakeholders like banking regulator RBI, Finance Ministry and Corporate Affairs Ministry. An official from SEBI stated that apart from setting up new rules after discussions with the stakeholders, any crowdfunding involving sale of securities can be either regulated under SEBI’s existing norms for Collective Investment Schemes or Alternative Investment Funds.

While the market regulator is in the stage of finalizing guidelines on the use of social media in capital markets, it is also looking at all possible means to curb manipulators on the medium.