Relevance: GS III (Indian Economy & Capital Markets) | Source: Securities and Exchange Board of India / Financial News

1. What is the Big News?

The Securities and Exchange Board of India (SEBI), the official watchdog of our stock markets, is getting a massive technological upgrade.

• The Reason: Today, millions of ordinary Indians are investing their hard-earned money in the stock market. Sadly, this has also attracted fraudsters trying to cheat them.
• The Solution: SEBI is shifting from slow “manual checking” (using human eyes) to high-speed “technology-led checking” (using smart computers) to catch criminals instantly.

2. How do Fraudsters Cheat Common People?

To understand why SEBI needs this tech, we must look at the three main tricks used to loot public money:

• The “Pump and Dump” Trick: Fraudsters buy cheap shares of a bad company. Then, they spread fake good news on WhatsApp or Telegram to artificially increase the price (“Pump”). When innocent people buy the shares at a high price, the fraudsters sell their shares and run away (“Dump”). The price falls, and common people lose their money.
• Fake/Rented Accounts: Criminals often rent the bank accounts of poor or unaware people to hide their real identity. These are called “Mule Accounts.”
• Greedy Influencers: Many social media stars (Finfluencers) take secret money from companies to tell their followers to buy a particular share, without telling the public it is a paid advertisement.

3. SEBI’s New “Digital Police”

Since millions of trades happen in one second, humans cannot catch every thief. SEBI is now using modern tools:

• Artificial Intelligence (AI): Smart computers are trained to catch unnatural jumps in share prices instantly.
• Finding the Hidden Mastermind: If 50 different trading accounts are being operated from the exact same mobile phone or Wi-Fi connection, the computer will instantly catch them as a fraud gang.
• Social Media Scanning: SEBI is using tools to constantly watch what influencers are saying online to stop illegal stock tips.

4. Why Does This Matter for India?

• Trust is Everything: If common people feel the stock market is a place only for thieves, they will stop investing. Without public investment, Indian companies cannot grow.
• Stopping Crime Before it Happens: Earlier, SEBI used to punish criminals after the money was stolen. Now, with advanced technology, SEBI wants to stop the crime before it happens.

UPSC Value Box

With reference to the Indian stock market, consider the following statements:

1. A “Pump and Dump” scheme is an illegal practice used to artificially increase a stock’s price with fake news.
2. The Securities and Exchange Board of India (SEBI) is a body established to protect the interests of investors.
3. Network analysis technology helps regulators find out if multiple trading accounts are being operated from a single internet connection.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Correct Answer: (d)