The Securities and Exchange Board of India (SEBI) has been taking a tough stance against financial influencers, or “finfluencers” as they are called, cracking down on and heavily penalising those violating market regulations, providing unregistered investor advisory services or unsolicited stock tips on social media platforms. The latest to feel the heat is Mohammad Nasiruddin Ansari (Nasir), Golden Syndicate Ventures, and his associates who ran Baap of Charts, a social media platform popular among the trading community.
The market regulator, in its earlier interim order–cum–show-cause notice against Baap of Charts in October 2023, had noted that their unregistered investment advisory activities were prima facie found to be in violation of Section 12(1) of the SEBI Act. Also, their activities were prima facie fraudulent and manipulative and in violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations.
SEBI’s investigation had revealed that Nasir, promoting himself as a stock market expert, was luring investors to enrol on various educational courses offered by him and inducing them to invest in the share market by promising them the prospect of making profits with near certainty if the recommendation or advice was followed.
SEBI had also received a complaint stating Nasir was “looting” retail traders by showing assured returns.
The website had disclaimers like the intention is not to provide any investment advice and that he is not a SEBI-registered investment or financial advisor. According to the regulator, the disclaimers were found to be ambiguous and an attempt to whitewash the illegality involved.
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Importantly, it was observed that Nasir, who presented himself as a stock market expert and claimed Baap of Chart’s recommendations had 95 per cent accuracy, had, in fact, incurred a net trading loss of over Rs 2.89 crore between January 01, 2021, to July 07, 2023.
The noticees, in their response to the show-cause notice, had acknowledged that SEBI rules and regulations were inadvertently violated due to a lack of knowledge and understanding.
SEBI in its final order issued now says the noticees (Nasir, Rahul Rao Padamati, Tabraiz Abdullah, Asif Iqbal Wani, Golden Syndicate Ventures, Mansha Abdullah and Jadav Vamshi) will have to return over Rs 17.20 crore collected (or received) from investors as fees or consideration in respect of their unregistered investment advisory activities, within three months of the order. They will have to open an escrow account with a scheduled bank and deposit the amount in the account, which shall be used only for refunds.
The noticees will also have to issue public notices in newspapers detailing the modalities for making a claim for the refund, including details of the contact person. The repayments to investors will have to be done via bank transfers with audit trails to identify the beneficiaries of repayments. The bank accounts of the noticees shall also remain frozen till they comply with the directions and deposit the amount in the escrow account equivalent to their respective refund obligation.
The noticees can’t sell their assets, properties and holdings of securities and mutual funds, except for transferring the funds to the escrow account. While Nasir has been barred from accessing the stock market for one year, the other noticees have been barred for six months. A monetary penalty too has been imposed on them.
This is not the first time that the market regulator has acted against any finfluencer. Last year, SEBI took action against YouTuber and options trader PR Sundar over an alleged violation of investment adviser norms. In April this year, Ravindra Balu Bharti, who was involved in training related to share trading, was asked to pay Rs 12 crore.
In June this year, SEBI tightened norms further and barred regulated entities like stock brokers from having any association directly or indirectly with such finfluencers.
