Crackdown on fraudulent, misleading companies giving share market tips; SEBI bars these websites
Crackdown on fraudulent, misleading companies giving share market tips; SEBI bars these websites
Certain individuals create unregistered investment advisory websites periodically and lure investors by promising assured monthly income to them.
Making money in the stock market or finding a multi-bagger is what many investors dream of. There’s nothing wrong in it. However, when it is not backed by self-driven research and is rather based on tips from friends, colleagues or entities with vested interests, it may even end up with a huge loss of capital.
Market regulator SEBI keeps receiving complaints and grievances from investors about certain investment advisory websites cheating them of their money. The modus operandi of such unregistered investment advisory websites is simple – Make investors subscribe to their investment packages and then run away with the money.
The investors are promised huge returns and the websites typically use terms such as ‘zero loss’, ‘jackpot’, ‘rumour based’, ‘sureshot’, etc. in the names of the packages offered in their websites and promise accuracy between 90% to 99%. As far as return on investment is concerned, sample this: ‘Earn monthly minimum 800-900 percent profits’
The Whole Time Member of SEBI, Madhabi Puri Buch, passed an ad-interim ex-parte order dated March 20, 2019, debarring certain websites and their owners to continue operations.
It was established that certain websites and individuals were allegedly offering unregistered investment advisory services, but in reality they were running the operations without obtaining the SEBI registration as an Investment Adviser under SEBI (Investment Advisers) Regulations 2013. On the contrary, they claimed through their websites that they are SEBI-registered Advisory firms.
The Order obverses that, “Based on the information available on the unregistered investment advisory websites and complaints received by SEBI against such websites, it is prima facie observed that the Noticees create unregistered investment advisory websites periodically and lure investors by promising assured monthly income with unbelievable returns of 300-800% on buying and selling of securities based on the tips provided by them. Once the subscription is received, the Noticees either give stock tips for few days to the subscribers and then stop entertaining their calls, or avoid the calls of the subscribers entirely without giving any stock tips.”
The Order obverses that, “Based on the information available on the unregistered investment advisory websites and complaints received by SEBI against such websites, it is prima facie observed that the Noticees create unregistered investment advisory websites periodically and lure investors by promising assured monthly income with unbelievable returns of 300-800% on buying and selling of securities based on the tips provided by them. Once the subscription is received, the Noticees either give stock tips for few days to the subscribers and then stop entertaining their calls, or avoid the calls of the subscribers entirely without giving any stock tips.”
Subscription offers were generally in the range of Rs 25,000 and, as per this Order, the total subscription amount garnered through subscription fee for unregistered investment advisory activity on the websites by the entities was in excess of Rs 10 crore.
Most of the websites also mentioned performance track record and testimonials, possibly with a view to lure investors to pay subscription fee for the advisory/stock tips products offered by them. The websites also contained a link over a SEBI logo with the word ‘approved’ below it, which contained the scanned copy of SEBI registration.
The following websites are listed in the Order, a copy of which has been sent to the Banks, Stock Exchanges, Depositories and Registrar and Transfer Agents.
Several studies in the past have shown that equities generate high inflation adjusted returns over the long term. However, choosing the right stock is equally important and the probability of losing the entire capital is high in case of penny stocks or lesser-known operator driven stocks. As an investor, one should refrain from too-good-to-be true kind of investment offers and tips. Buying stocks may not be everybody’s domain and, therefore, retail investors should stick to mutual funds or buy stocks after proper research and analysis with adequate measures to contain the losses.
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