Finfluencer with nearly 2 million followers, who also used to run a stock-market training institute, has been asked to part with "unlawful gains" of over Rs 12 crore.
The market regulator's investigations so far suggest that a stock-market training institute was fronting an unregistered advisory and that an authorised person's office was enabling this unregistered advisory. An authorised person works for a stock broker to help the broker's client execute their trades.
The Securities and Exchange Board of India (Sebi) passed an interim order against an unregistered investment advisory named Ravindra Bharti Education Institute Private Ltd (RBEIPL), its former director Ravindra Balu Bharti and his wife Shubhangi Bharti, and current directors Rahul Ananta Gosavi and Dhanashri Chandrakant Gosavi. The regulator has asked them to credit the money received for investment advisory services and has banned them from the securities market until further orders.
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An interim order was passed by Sebi's WTM Kamlesh C Varshney because the regulator recognised an urgency to act, given the influence Ravindra Bharti has over a large number of investors. Ravindra Bharti has two YouTube Channels named Bharti Share Market Marathi with 10.8 lakh subscribers and Bharti Share Market - Hindi with 8.22 lakh subscribers.
In the order, the regulator stated, "facts of the case as narrated above glaringly disclose how the investors’ confidence has been compromised and how the systems are being abused for personal gains and attainments by the entities like Noticee no. 1 (RBEIPL) by, devising mischievous ways to circumvent the provisions of laws for their personal enrichment but in detriment to the investors. Guaranteed returns upto 1000% is a clear case of abuse of investors’ confidence in the securities market".
Background
The regulator began investigating Balu Motiram Bharati, who is an authorised person of a stock broker and the father of Ravindra Bharati, and as part of that looked into RBEIPL. The regulator found that there was a lot of overlap between the operations of the authorised person and RBIEPL.
The authorised person and the training institute was operating from the same premises and dealers of Balu Motiram were found to be employed with the training institute.
There were more overlaps, such as the authorised person's office enabling an unregistered investment advisory run by RBEIPL.
The investigating officials found that RBEIPL, which claimed to be providing training in stock market, was running an unregisterd that promised even 1000 percent returns! The trades recommended by RBEIPL were being executed by the office of the authorised person, even when the client did not fully understand the trade.
Novel loophole
The authorised person's office had found a novel way to get around a regulatory requirement, according to Sebi's investigating officials.
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A stock broker or its authorised person is required to maintain a record of a client placing an order. This is done to ensure that the stock's buying or selling is the client's idea, since the stock broker or authorised person is only allowed to execute trades that the client wants. But the two entities--the authorised person's office and RBEIPL--worked together to get around this.
Whenever REIPL advised its client to take an order, it would first call the client and brief them about the stock recommendation. After that, a person from the authorised person's office (operating from the same premises) would call the client and ask them to confirm their order and this call would be recorded to show that the stock idea was initiated by the client.
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