SEBI Steps Up Tech Monitoring to Tackle Retail Investment Scams

As per news reports, India now has over 140 million unique investors, showing a steady rise in retail participation in capital markets.  

Alongside this growth, the Securities and Exchange Board of India (SEBI) has observed an increase in pre-investment frauds, where individuals lose money before engaging with registered intermediaries. 

Digital Fraud Targeting Market Entrants 

SEBI Chairman Tuhin Kanta Pandey, who completed 1 year in office on March 1, noted that new investors are often approached through fake trading applications, WhatsApp groups and informal advisory networks offering assured returns.  

In several instances, funds are transferred directly to personal accounts rather than regulated channels. 

Monitoring Before Market Entry 

According to SEBI, many intending investors are being diverted before they formally enter the financial system. These cases often remain outside the traditional regulatory perimeter, as the interaction never reaches licensed brokers or advisers. 

SEBI has indicated that such incidents are becoming more frequent, particularly through digital communication platforms that operate without oversight. 

Technology-Led Oversight 

To address this, SEBI has expanded its use of data monitoring systems and artificial intelligence tools. These systems are being deployed to identify misleading financial content, track unregistered advisory activity, and monitor suspicious online behaviour in real time. 

The regulator is also encouraging the use of verification tools such as SEBI Check, which enables users to confirm the legitimacy of entities seeking investments. In addition, validated payment channels, including verified UPI handles, are being promoted to reduce the risk of funds being redirected. 

Investor Behaviour and Product Complexity 

SEBI has reiterated concerns about retail participation in complex market segments, particularly derivatives, without adequate understanding of associated risks. The regulator has continued to highlight structured investment approaches such as pooled vehicles and Systematic Investment Plans (SIPs) as more stable entry routes. 

Separately, caution has been raised regarding unregistered online commentators who promote high-return strategies without regulatory oversight. 

System Reviews and Operational Stability 

Recent technical disruptions at market infrastructure entities such as MCX and NSDL were addressed through contingency measures, including the use of disaster recovery systems. Root cause analyses are being conducted, with findings to be reviewed by SEBI’s Technical Advisory Committee. 

The regulator is also examining operational aspects of Portfolio Management Services (PMS), including the current requirement for investors to open new demat accounts when switching portfolio managers. 

Read More: SEBI Removes 1.2 Lakh Misleading Finfluencer Posts Using AI Surveillance Tool ‘Sudarshan’! 

Conclusion 

With retail participation expanding, SEBI’s current focus includes early detection of fraud risks, wider use of verification tools and system-level reviews aimed at maintaining operational continuity and investor safeguards. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.   
 
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