If you have actively traded in stocks, you might have caught wind of people receiving “tips” to buy and sell certain stocks. These unwanted trading calls and messages come from some unknown phone numbers, even though we have not consented to receive any such tips from third parties.
Such tips are known as “unsolicited stock tips”.
They are known as “unsolicited” because of people receiving them involuntarily.
Unwanted stock tips via calls and messages are used as a method of price manipulation by an operator to boost the price of a certain stock.
How does this work?
Suppose the price of Stock A is consistently falling, and an operator is aiming to boost it.
They will send unwanted stock tips via social media, calls, and text messages to prompt unaware investors into buying it.
Following this, this group will start offloading its ownership of Stock A to such investors, thus increasing the price and trade of the stock.
This entire process of wrongly inflating the price of a stock is known as a “pump and dump” scam. It is commonly carried out through unsolicited stock tips.
Why such tips a cause of concern to individual investors?
While experienced investors might simply ignore such tips, many beginners and uninformed investors fall prey to scams by taking action based on these tips.
Usually, these tips advise receivers to take action which might not be suitable for their portfolios, thus causing them multiple losses while trading.
How do these tipsters get our phone numbers?
There are two main sources from where these wrong-doers can get our phone numbers –
1.The Telecom Companies
Brokerage firms often work with telecommunication providers to connect with their customers.
After brokerage firms like Zerodha asked telecom companies to investigate, it was found that the departments responsible for handling these calls had been exposed to leaks.
2.SMS Gateways
An SMS Gateway is an online service that lets a user send messages to multiple cellphones under a certain network. Major stock exchanges use such gateways to send bulk messages to the general public.
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It is possible that these gateways might have been “harvested for numbers” by the tipsters since such services must already have huge databases of phone numbers.
How to Stop Unwanted Trading Calls and Messages?
The TRAI DND (Do Not Disturb) feature is the most useful step in preventing unwanted trading calls and messages.
This is an initiative taken by the Telecom Regulatory Authority of India (TRAI), that helps users block all commercial spam messages and calls.
Simply send the text, “START 0” to 1909 to be registered on the DND.
You can also register for the DND service by downloading TRAI’s phone application, called DND 2.0.
How to Report Unsolicited Trading Calls and SMS?
It might happen that even after registering for the DND, some tipsters might get access to your number and you may receive unwanted tips.
If this happens, there are multiple steps that you can take to report such numbers.
1.You can report the sender of the tip to TRAI by reporting it to 1909 in the following format –
unsolicited stock tip, the number you received it from, date
For example, if you receive a tip from the number 9123456789 on 15 January 2020, you will send the following text to 1909 –
unsolicited stock tip, 9123456789, 15/01/2020
2. You can report these tips on TRAI’s phone application – DND 2.0.
3. You may report such communication to NSE by submitting a tip-off to their official website.
4. You can register an official complaint on SEBI’s investor redressal system, SCORES (SEBI Complaints Redress System).
5. SEBI has also issued the following press releases to inform the public about such stock tips –
- ‘Curbing misuse of bulk SMS in the Securities Market’, dated 18 August 2017.
- ‘SEBI cautions public on unsolicited calls/ SMS’, dated 16 December 2016.
With such releases, SEBI has aimed to inform investors, telecom services and brokerage firms about the harmful effects of such tips and the actions it will take to redress this problem.
Bottomline
Unsolicited stock tips adversely affect investors and traders and proper caution is required against them.
With the help of the authorities of the stock market, we can take active steps to ensure that our portfolios are protected from such malpractices.
Happy learning!
