India’s mom-and-pop investors are facing testing times. During a pandemic-era surge in the stock market, millions poured their savings into equities, drawing on advice from unauthorized financial advisers and social media “gurus” to help identify the next big ticket. But a recent slide in stock values has laid bare the dangers of India’s lax capital market regulations. Many amateur retail investors, especially the young, sought to make a quick buck by consulting informal groups on platforms like WhatsApp and Telegram. Recourse for investments gone awry is limited: In India, fines for everything from insider trading to wire fraud are a fraction of those imposed in some western nations.
India’s regulators are now cracking down on internet scams. The Securities and Exchange Board of India recently urged investors to stay vigilant of so-called “pump and dump” schemes — a type of securities fraud that involves artificially inflating prices — and not rely on stock tips from unverified online services.
It’s an increasingly fraught topic around the world. Securities regulators from Spain to Australia are mulling ways to enforce restrictions against social media influencers. Earlier this year, SEBI shut down a Telegram channel called “Bullrun2017” that purported to specialize in penny or small-cap stocks. Group administrators bought shares of small companies, recommended them to their 50,000 or so subscribers, and then sold them for a profit, according…
