An authorised person (AP) of a listed brokerage has been asked to pay Rs 9 lakh as penalty for running an illegal advisory and defrauding the public.
Abid Ali, an AP of Angel One (Registration No. AP01061201151994), ran an illegal advisory named Trade 26 Research, according to order issued by the Securities and Exchange Board of India (Sebi) on May 16.
Moneycontrol had written about Trade 26 Research's illegal advisory in July 2023. One month after Moneycontrol's report was published, the regulator surfed for the entity's website as part of its investigations and found the website defunct. However, the regulator's officials checked the website's archives and found that the entity was indeed providing investment advisory services without a certificate of registration.
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The regulator also checked the bank transactions of the entity and found keywords such as options, stock, tips, share market and so on associated with these transactions.
Ali submitted to the regulator that he ran a small clothing store and that, after the pandemic hit the business, he picked up "graph reading skills" from YouTube and Google and started investing in the share market and made little profits from it.
He said that his friends showed an interest to learn the "grap reading technique" from him and he therefore he started taking classes for them, without asking for a compensation. However, his friends insisted on paying him "as a good gesture". He also said that he never "insisted" that his friends buy particular shares.
He said that he set up the website by hiring a freelance web designer, who then added words like option, MCX Bullion etc. by copy pasting from other websites. Ali also said that it was a dummy website that does not source any business for him.
But when the regulator asked him to submit evidence to prove that he was only teaching, he failed to do so.
On Ali's claim that he wasn't aware of the website's contents, the Sebi order said that they were without any merit.
In the order, the regulator also took note of Trade 26's "non-genuine" and "deceptive" act of promising assured returns and consistent profits, since this conceals the element of market risk.
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In the interaction with Moneycontrol, Trade 26's sales representative had promised 10 percent everyday. He said that by putting Rs 20,000 an investor can expect to make Rs 2,000 every day, which translates to a whopping Rs 3,650 percent a year!
The sales executive told Moneycontrol's reporter that profit would be shared in a 70:30 ratio, with 70 for the investor, and added that a loss would have to be borne 100 percent, without clarifying what that meant. It could mean that a loss is absorbed entirely either by the ‘service’ or by the investor.
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