SEBI flags pattern used by SME platform-listed firms, promoters to rig share prices, cautions investors

SEBI warns investors of promoters manipulating SME stocks through positive portrayal before offloading at high prices. Be cautious.

The Securities & Exchange Board of India (SEBI) has cautioned investors against a specific pattern deployed by promoters of certain companies listed on the Small and Medium Enterprises (SME) platforms of stock exchanges to induce investors through positive portrayal and corporate actions before offloading the stocks at elevated prices   

“It has come to the notice of SEBI that, post listing, some of the SME companies and / or their promoters have been resorting to certain means that project an unrealistic picture of their operations. Such companies/promoters have been seen to make public announcements that create a positive picture of their operations,” SEBI said in a statement. 

“These announcements are typically followed up with various corporate actions such as bonus issues, stock splits, and preferential allotments. The above actions create a positive sentiment amongst investors, which induces them into purchasing such securities,” the market regulator said. 

“Simultaneously, this also presents an easy opportunity to the promoters to off-load their holdings in such companies at elevated prices,” it added. 

SEBI said in the recent past it had passed orders against such entities, which are available on its website. 

“It can be seen that the modus-operandi of these entities follows a pattern that is by and large similar to what has been mentioned above,” it said.

The SME platform of the stock exchanges was operationalised in 2012 to serve as an alternative source of raising funds for emerging businesses.