The Securities and Exchange Board of India (SEBI) issued a press release dated August 28, 2024 cautioning investors about potential risks associated with investing in securities of companies listed on the Small and Medium Enterprises (SME) platform of stock exchanges.
While the SME platform has been a valuable channel for emerging businesses to raise funds, SEBI has observed that some companies and their promoters have been engaging in practices that can mislead investors. These practices often involve making exaggerated claims about their operations, followed by corporate actions like bonus issues, stock splits, or preferential allotments. Such actions can create a positive optimism among investors, promoting them to purchase securities at inflated prices. In some cases, promoters may exploit this situation to offload their holdings at higher prices.
SEBI, in the recent past, has taken strict action against such entities engaged in fraudulent and manipulative activities. It has been observed that the modus operandi of many such entities follow a similar pattern as described above. Investors must remain vigilant, exercise caution, and conduct due diligence before investing in such companies
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