Investor Alert: How to Stay Protected from IPO Allotment Scams

Switzerland-based UBS Group AG recently warned that certain unknown and unauthorised individuals are impersonating their brand to lure people into fraudulent schemes, promising high returns, IPO allotments, and more.

According to the notice, these individuals misuse the UBS name, logo, employee names, and photos, falsely claiming association with “UBS Securities” or “UBS.” They operate fraudulent websites, domains, mobile applications, and WhatsApp groups, and post deceptive messages on social media.

How do Fraudsters Operate?

The primary reason people fall for this scam is their desire to get rich quickly, especially when reputable names like UBS are used. The fraudsters exploit this greed by promising extraordinary returns on investments. However, instead of making any profit, you will lose your initial investment entirely, as all your money will be taken away.

IPO Allotment Frauds

Protecting yourself from IPO (Initial Public Offering) allotment fraud involves several steps and precautions. IPO allotment frauds are becoming increasingly common, with scammers targeting unsuspecting investors.

IPO allotment is the process of distributing shares to investors who have applied for an IPO. It’s essentially a lottery system, with the odds of getting an allotment depending on the overall demand for the IPO and there is no guaranteed way to secure an allotment.

Here are some essential steps to safeguard yourself:

1. Verify the IPO Source

Sebi Registration: Ensure that the IPO is registered with the Securities and Exchange Board of India (Sebi).

Official Channels: Only apply through official channels like recognised stock exchanges (BSE, NSE), authorised brokers, and registered online platforms.

2. Be Wary of Unverified Sources

Ignore unsolicited messages: Do not respond to emails, SMS, or WhatsApp messages promising guaranteed IPO allotments or high returns.

Verify information: Always cross-check information from official sources like the company’s website, stock exchange, or your broker.

Avoid social media rumours: Be cautious of tips or advice shared on social media platforms.

3. Use Reputed Brokers and Platforms

Registered Brokers: Use Sebi-registered brokers for applying to IPOs.

Official Websites and Apps: Apply only through official websites and mobile apps of recognized brokers and stock exchanges.

4. Check the Prospectus

Read the Prospectus: The IPO prospectus contains essential details about the company, its financial health, risks, and the purpose of raising funds. This document is filed with Sebi and should be available on their website.

5. Monitor for Red Flags

Too Good to Be True: Be cautious of unrealistic promises of guaranteed returns.

High-Pressure Tactics: Be wary of any high-pressure tactics urging you to invest quickly.

Unverified Information: Avoid unverified information from unofficial sources or social media.

6. Secure Your Personal Information

Protect Your Details: Do not share sensitive personal information like PAN, Aadhaar, bank account details, etc., with unauthorised persons or platforms.

Secure Internet Connection: Use a secure and private internet connection to avoid interception of sensitive data.

7. Stay Informed

Sebi Alerts: Keep an eye on Sebi alerts and circulars for any warnings related to IPOs.

Financial News: Follow financial news from reputed sources to stay updated on genuine and fraudulent activities in the market.

8. Report Suspicious Activities

Inform Sebi: Report any suspicious activities or potential fraud to Sebi.

Local Authorities: Inform local law enforcement authorities about fraudulent schemes.

9. Keep Records

Documentation: Maintain records of all communications, receipts, and application details when applying for an IPO.

Transaction Proofs: Keep transaction proofs for any money transferred for IPO applications.

Following these guidelines can mitigate the risk of falling victim to IPO allotment fraud.