A question that I often get asked is “There are so many people giving out advice and recommendations on social media without any SEBI registration. They have millions of followers on social media. They make the money without fear and no compliance burden. How come SEBI has not caught them?”
Some of those who ask this question were considering getting a SEBI registration. But at the back of the mind, it was always like, “do we need to?”
This was a troubling question, which finally seems to have an answer.
SEBI means business and it has sent a clear message, “Watch Out, Unregistered Advisers, because we are watching you.”
So, what happened?
SEBI took on one of the most well-known finfluencer – PR Sundar, who apparently was providing investment advisory services without a SEBI registration.
While most of the facts are out now, here is a quick takedown.
SEBI first sent a show cause notice as to why he was providing unregistered investment advisory services through his company Mansun Consultancy Private Limited.
PR Sundar decided to settle the case against him and his company with SEBI. Click here to read the settlement order.
The case was settled with SEBI wherein he had to pay Rs. 46.80 lacs to SEBI as penalty and fee disgorgement of approximately Rs. 6.08 crores including interest @12% pa. for carrying on unregistered investment advisory services.
Also, Mr. Sundar, Mrs. Sundar and their company have been refrained from dealing in securities in India for a period of one year from the date of passing of the settlement order.
What did SEBI observe in this case?
As an unregistered entity:
- His website mentioned that he provided advisory services.
- He provided daily calls on the social media (telegram) channel.
- He also charged fees for the services.
—
I have always held that giving tips on social media by charging a fee comes under the purview of Investment Advisor Regulations.
This case is a direct endorsement of that stand.
I am sure most of you have this question of what needs to be done or should not be done to avoid SEBI.
The answer lies in the points mentioned above as SEBI’s observations.
This order is also a knock on the door of all ‘unregistered investment advisers’ who think ‘they can get away with it.” Sorry, you can’t.
It is worthwhile to note that this is not the first time SEBI has issued a show cause notice against an unregistered entity.
Many adjudication orders have been passed against such individuals or entities with the penalty as well as debarring them from dealing in the securities market. Here is the latest one.
Now, if you are an unregistered adviser and reading this, know that the action is getting bigger now and you don’t want to be on the wrong side of the law.
You have 2 choices. Either stop giving advice or do it the right way – get registered.
If you are going with the latter, here is a useful link to get you started – What are the requirements?
OR
How to register a compliant with sebi with respect to unregistered advisers. Is it necessary that i should have dealt with them or a mere suspicion based on activities is fine?
I suggest you write an email to SEBI’s MIRSD department. Here are the details – https://www.sebi.gov.in/sebiweb/home/directory-of-sebi.jsp
If someone is providing advisory services for free but is a mutual fund distributor, does he need to get registered ?
If you are providing investment advisory to investors (other than distribution clients) for a fee you need to get registered with SEBI as an IA.
If you are providing advisory to your distribution clients only, you need not get registered with SEBI.
i was duped by one such scrupulous investment tip providers who shared fake screenshots of intraday profits and charged 11000 for one week and incurred a loss of around 15000 acting on his tips. Please let me know where and how to lodge a complaint against such unregistered and fake investment advisors.
Please send an email to sebi@sebi.gov.in with detials of your complaint. Also you may call on Toll Free Helpline:1800 266 7575
If a company or firm is engaged in intraday trading in Futures & Options on its own account, then whether it or its partner or employee executing the trades needs the certificate of Registered Investment Advisor? Having an Equity Derivatives Certificate – NISM Series – VIII should suffice.
If you are not providing advisory services to your clients and engaged in trading in own account, you need not get registered with SEBI as an Investment Adviser.