SMS scrips investors may see delayed payouts as exchanges up surveillance

Topics IRCTC | Adani Gas | IRB Infra

Investors may have to wait a year to get payment from sales of the stocks that are under the regulator’s gaze because of the manner in which they were sought to be perked up. The exchanges have put 45 such stocks on the list. They include Indian Railway Catering and Tourism Corporation (IRCTC), Edelweiss Financial Services, Adani Gas, and IRB Infra.

The exchanges have stepped up their surveillance and payouts will be made after only investigating the parties that deal in those stocks.

For such “SMS stocks”, wide-ranging trading tips were circulated between June and August on social media platforms, including WhatsApp and Telegram, apart from SMS.

The action is part of the watchdog mechanism the stock exchanges formalised last week in consultation with the surveillance department of the Securities and Exchange Board of India (Sebi), said a regulatory official.

The new mechanism will allow releasing withheld funds only after providing an undertaking as decided by the stock exchanges, even after scrutiny is completed. At present, there is no such timeline for withholding money from sales.

So if the name of a client (investor) selling the stock appears in such messages, the person will not receive the credit or the payout.


The broker will transfer the money to a bank account designated for this. The fund cannot be adjusted against debit in the account.

Based on defined objective criteria, the exchanges publish the list from time to time.

The regulator and the exchanges have adopted parameters and quantitative formula to define the concentration of selling, and after analysing them, the bourses put out the watch list, said the source cited above.

In June, the stock exchanges introduced new categories of lists — information and due diligence. Earlier, there were the historical watch list and current watch list.
On the information list there are 45 stocks, of which 19 are on the watch list, which is a subset of the first.

Among the 19 are scrips such as Adani Gas, Alembic, Delta Corp, Edelweiss Financial Services, India Cements, ITI, IRB Infrastructure, Mastek, and IRCTC.

However, due to there being some prominent names, brokers are facing challenges because this is causing inconvenience to genuine investors.

“Unless a qualitative check is done, people may act against good companies also. So, the exchanges must run these through filters while circulating this list. Or else putting the onus on members will lead to disputes and will be unfair also,” said a broker.

Another broker is of the view that the regulator should not use margins to penalise brokers, because there is no definition of concentrated selling and it is typically left to the judgement of the trading member.

Not complying with rules may attract more action, such as special inspection, levying additional margins (up to 25 per cent), and disciplinary actions.

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