Context
The markets regulator Securities and Exchange Board of India (SEBI) has warned that certain trading platforms are falsely claiming or suggesting affiliation with its registered Foreign Portfolio Investors (FPIs).
Key Highlights
- Market regulator Securities and Exchange Board of India (SEBI) has warned individuals against fraudulent buying and selling schemes with fake claims or guidelines of linkages with registered foreign Portfolio Investments (FPIs).
- These strategies lie to people with the aid of claiming that commercial enterprise opportunities are offered through FPI or Foreign Investment Investment (FII) sub-debts or special entitlement debts.
- SEBI said it has received several court cases where fraudsters trap victims of bank fraud with on-line trading guides, seminars and counseling programmes.
- They use social media structures like WhatsApp or Telegram, in addition to live streaming.
- These fraudsters pose as employees or friends of SEBI-registered FPIs, and lure individuals to download the packages.
- These programs purportedly permit them to purchase shares, enroll in IPOs, and gain ‘institutional account benefits’—all without the need for a central government trading or Demat account.
- These activities frequently involve the usage of mobile numbers registered beneath fake names to set up fraudulent schemes, Sebi said.
SEBI’s rationalization
- The market regulator clarified that the FPI investment facility isn’t always available to Indian residents, besides for the few specified in the SEBI (Foreign Portfolio Investors) Regulations, 2019.
- SEBI has no longer given any respite to Indian traders in terms of investing in the securities market in FPIs.
What is Foreign Investment Investment (FPI)?
- In Foreign Investment Investment (FPI), an investor purchases foreign investment assets. This includes financial belongings along with constant deposits, stocks and mutual funds.
- All deposits are passively held through investors. Investors in foreign shares are called foreign shares.
- Foreign reserves increase volatility. As a result, the threat increases.
- The idea of investing in foreign markets is to diversify the portfolio and get a return on investment.
- Investors anticipate high returns because of the risk they’re willing to take.
- The Securities and Exchange Board of India (Sebi) operates the FPI.
- SEBI has recently added the Foreign Sector Investment Rules, 2019 .
- FPIs are required to follow the Income Tax Act, 1961 and the Foreign Exchange Management Act, 1999.
Advantages of FPI
- Types of Investments:
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- FPI offers investors the possibility to diversify their portfolios.
- As an investor, you can diversify your portfolio to maximise returns.
- Suppose that if you make a huge loss on investment assets in X country, you can make a gain on investment belongings in Y country.
- This way, you could have greater flexibility for your investment to increase your possibilities of making a profit.
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- International Loans:
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- Investors can get access to higher costs of foreign debt.
- They can amplify their credit. By extending their credit score, investors can get admission to their line of credit.
- If a home credit score rating is negative, an international credit score rating can be an advantage.
- This allows the investor to apply greater leverage and earn a higher return on investment.
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- Major markets to reach:
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- Sometimes, the foreign market might not face as much competition as the domestic market.
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- High Liquidity:
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- Foreign bank investments generate excessive returns.
- The investor can buy and sell foreign securities with no regulations.
- This offers investors buying electricity to behave when a good buying possibility arises.
- Investors should purchase and sell groups quickly and effortlessly.
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- Benefits of Currency Exchange
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- An investor can take advantage of the energetic global foreign money.
- A forex can cross up or down dramatically, and hard currencies can be used to assist the investor.
Source: The Indian Express
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