SEBI Issues Advisory Against Fraudulent FPI-Based Trading Schemes Targeting Indian Investors

On 22-8-2025, the Securities and Exchange Board of India (‘SEBI’) issued an Advisory Against investment in Fraudulent Trading Schemes claiming to be offered to Indian residents by Foreign Portfolio Investors (FPIs). This advisory warns Indian investors against fraudulent schemes falsely claiming to offer stock market access through Foreign Portfolio Investors (‘FPIs’), Foreign Institutional Investors (‘FIIs’).

Key highlights from SEBI’s advisory:

1. Recently, SEBI observed a disturbing increase in the number of fraudulent investment schemes that purport to provide Indian residents with direct access to stock market trading via FPIs.

2. Responding to it, SEBI has issued a strong advisory urging investors to remain vigilant against fraudulent trading schemes that falsely claim to offer stock market.

3. Many of these fraudulent schemes exploit the terminology associated with FPIs and FIIs to create a false sense of legitimacy.

4. These deceptive schemes are often disseminated through popular digital communication platforms such as WhatsApp, Telegram, and Instagram. Scammers use these channels to circulate promotional content that appears professional and convincing, targeting individuals with promises of high returns and exclusive access.

5. These schemes are designed in a way that they look authentic and professional and offers fake promises like:

   • Institutional trading accounts

   • IPO shares at discounted prices

   • Guaranteed allotments in upcoming IPOs

   • Access to anchor book allocations

   • Block trades at below-market rates

6. SEBI has reiterated that under the SEBI (Foreign Portfolio Investors) Regulations, 2019, resident Indian investors are generally prohibited from investing through the FPI route. Only under very specific and narrowly defined circumstances can such investments be considered, and these exceptions are not applicable to the general public.

7. To prevent the misuse of foreign investment channels and protect retail investors, SEBI has made it clear that any app, online group, or individual claiming to offer stock market access via FPIs or FIIs is operating outside the bounds of legality. Such entities are not authorized to provide these services and should be avoided.

8. In its advisory, SEBI has strongly encouraged investors to adopt the following precautionary measures:

   • Exercise extreme caution when approached with unsolicited investment opportunities, especially those that promise unusually high returns or exclusive access.

   • Verify the registration status of any financial entity or intermediary before engaging in any investment activity. This can be done through SEBI’s official website or other trusted regulatory portals.

   • Use only authentic and SEBI-registered platforms and mobile applications for trading and investment purposes. These platforms are subject to regulatory oversight and offer a safer environment for financial transactions.

   • Stay informed and educated about the latest trends in financial fraud to better recognize and avoid potential scams.