SEBI’s proactive approach aims to safeguard market integrity and protect investors from fraudulent practices
In 2025, the Securities and Exchange Board of India (SEBI) has intensified its efforts to combat “pump and dump” schemes, a form of market manipulation where the price of a stock is artificially inflated (“pumped”) to attract investors, only for the perpetrators to sell off their holdings at the peak, leading to a sharp price decline (“dump”) and significant losses for unsuspecting investors.
Understanding Pump and Dump Schemes
Pump and dump schemes typically involve the dissemination of false or misleading information to inflate a stock price. Perpetrators may use various channels, including social media platforms, online forums, and even mainstream media, to create hype around a particular stock, often targeting low-priced, low-volume stocks that are more susceptible to price manipulation. Once the stock price has been artificially elevated, these manipulators sell off their shares at the inflated price, causing the stock’s value to plummet and leaving other investors with significant losses.
SEBI’s Regulatory Framework and Actions
SEBI has established a comprehensive regulatory framework to detect and prevent such fraudulent activities. This framework includes surveillance mechanisms, stringent disclosure requirements, and enforcement actions against violators. In recent years, SEBI has imposed substantial fines and market bans on individuals and entities found guilty of engaging in pump and dump schemes.
For instance, in May 2024, SEBI imposed penalties totaling ₹11.90 crore on 19 entities involved in a pump and dump scheme concerning the shares of Superior Finlease Ltd. The regulator barred these entities from the securities market for up to five years, underscoring its commitment to maintaining market integrity.
Enhanced Surveillance and Monitoring
In 2025, SEBI has further enhanced its surveillance and monitoring capabilities to detect suspicious trading activities in real-time. The regulator employs advanced data analytics and algorithmic tools to monitor trading patterns, identify anomalies, and track the dissemination of information across various platforms. This proactive approach enables SEBI to act swiftly against potential market manipulators, thereby protecting investors and maintaining fair market practices.
Collaboration with Other Agencies and Platforms
Recognizing the role of social media and digital platforms in the spread of misinformation leading to pump and dump schemes, SEBI collaborates with other regulatory agencies and technology companies to monitor and regulate content related to financial markets. In December 2024, SEBI flagged 8,890 instances of unlawful or misleading content across social media and notified leading platforms to take action against the accounts responsible for disseminating false claims.
Investor Education and Awareness
SEBI places significant emphasis on investor education and awareness as a preventive measure against pump and dump schemes. The regulator conducts regular awareness campaigns, workshops, and seminars to educate investors about the risks associated with such schemes and the importance of conducting thorough due diligence before making investment decisions. By empowering investors with knowledge, SEBI aims to reduce the susceptibility of the investing public to fraudulent schemes.
Regulation of Financial Influencers
The rise of financial influencers, or “finfluencers,” has added a new dimension to the challenge of preventing pump and dump schemes. In response, SEBI has proposed regulations to prevent entities from collaborating with unregistered financial influencers for marketing campaigns. This move is aimed at ensuring that investment advice disseminated through social media is accurate and reliable, thereby protecting investors from being misled by unverified sources.
Recent Enforcement Actions
SEBI’s commitment to curbing pump and dump schemes is evident from its recent enforcement actions. In March 2023, the regulator barred 55 entities, including actor Arshad Warsi and his wife Maria Goretti, from the securities market for alleged price manipulation through misleading YouTube videos. This case highlighted the use of social media platforms in facilitating pump and dump schemes and underscored the need for regulatory oversight in the digital space.
Challenges and the Way Forward
Despite SEBI’s robust regulatory framework and proactive measures, challenges remain in completely eradicating pump and dump schemes. The rapid evolution of technology and the increasing sophistication of fraudulent actors necessitate continuous adaptation and enhancement of regulatory strategies. SEBI’s ongoing efforts to collaborate with other regulatory bodies, enhance surveillance technologies, and promote investor education are crucial steps toward mitigating the risks associated with pump and dump schemes.
SEBI’s multifaceted approach to addressing pump and dump trades in 2025 reflects its unwavering commitment to maintaining the integrity of India’s financial markets. Through stringent regulatory measures, enhanced surveillance, collaboration with digital platforms, and a focus on investor education, SEBI strives to protect investors from fraudulent schemes and ensure a fair and transparent trading environment. As the financial landscape continues to evolve, SEBI’s proactive stance serves as a bulwark against market manipulation, fostering confidence among investors and contributing to the overall stability of the financial system.
