Asmita Patel Order: SEBI clarifies once again what investor education is and what isn't

While the SEBI order noted that the recent direction will only come in effect prospectively, the order added that the difference between educational activity and what is not an educational activity was understood well before the circular.

The capital markets regulator has once again clarified how investor education is different from investment advisory, in the order issued in the matter of Asmita Patel Global School of Training.

In the interim cum showcause notice issued on February 6, the Securities and Exchange Board of India (SEBI) disgorged illegal gains of nearly Rs 54 crores made by the school and other related entities, and has asked why the regulator should not go after the more Rs 104 crore that were collected through various courses.

In what could be a defining detail for stock-market training institutes, the order has clarified how the regulator looks at investor education versus advisory. In this matter, the order has referred to its recent circular, issued on January 29, which explains what distinguishes education from advice/recommendation.

Also read: SEBI impounds Rs 53.67 cr from Asmita Patel Global School of Trading; could go after Rs 104.6 cr earned as fee

The circular says, "A person engaged solely in education shall mean that such person is not engaged in any of the two prohibited activities. Such person should not be using the market price data of the preceding three months to speak/talk/display the name of any security including using any code name of the security in his/her talk/speech, video, ticker, screen share etc. indicating the future price, advice or recommendation related to security or securities."

While the SEBI order noted that this direction will only come in effect prospectively, the order added that the difference between educational activity and what is not an educational activity was understood well before the order. The period under investigation in this case was between August 26, 2019, and October 31, 2023.

The order added, "Providing stock specific advice is quite clearly outside the scope of educational activity. It clearly falls within the domain of investment advisory/research analyst activity"

The SEBI order also noted the particulars of this case, which weighed in the directions issued. It said, "Further, in this case there are monitoring of investments, real time communication of wrong trade, stop loss, etc. which clearly shows that even before the issuance of this circular, the Noticee no. 1 (Asmita Patel Global School of Trading) was doing more than just educational activity, at least in the courses whose evidences are discussed in this order."

Therefore, the regulator felt the need to issue an ad-interim order to stop the entities from carrying out these activities and to protect the interest of students/investors/participants.

It should emphasised that this is an interim order, which the regulator passes when it believes that there is a need for urgent action, and is not a final order. Even the SEBI order has called attention to this in saying that the present order should not be taken as a final order and that it is based on prima facie findings, and that the noticees have full opportunity to provide their defence and prove their innoncence.