How furus manipulate `verified’ P&L statements to show profits on their trades 

Market insiders said that this is a pretty common practice among people who sell these online courses.

A finfluencer may have accidentally revealed how furus, or fake stock market gurus, manipulate their trading P&L statement to sell courses.

Furus often display their P&L statements, which show what profit they made by trading, to advertise their trading chops and use it to sell their online  stock market courses.

In an online discussion on whether these statements need to be verified, SEBI-registered research analyst Vibhor Varshney spoke of how even P&L statements can be manipulated.

Also Read | “Most ignorant statement ever uttered”, “cynical idiot”: Mark Minervini lashes out at Indian finfluencer

Last November, options trading platform Sensibull launched a verified P&L feature through which traders could directly share their trading positions from the firm’s website. Recently, Fyers, a brokerage, launched a similar feature. This has faced a lot of resistance from many finfluencers.

During the discussion, Varshney, who also conducts courses, elaborated on why even verified P&L statements are no guarantee that a person knows how to trade well. He said, “Buy (a security) from one broker and sell from another, and then show the P&L statement of the account that is showing a profit.”

In a conversation with Moneycontrol, Varshney said that he had seen many traders share P&L statements from different brokerages on days they had made profits. “Either share the statements every day and from the same brokerage, or don’t share at all,” he said.

Also, he added that many traders show P&L statements of accounts that belong to others, claiming the profits generated as their own. “Maybe because they are running illegal PMS-es,” he said.

Stock market trainers and finfluencers are often approached by investors to manage their money, and the former makes an illegal arrangement with the latter for a fee. Illegal because only SEBI-registered practitioners can manage others' money. But besides this income, some of these finfluencers also use their clients’ trading accounts to advertise the profits they have generated, in the hope of drawing more students or clients.

Here too, verified P&L statements can be abused to give the wrong picture.

Market insiders said that this is a pretty common practice among people who sell these online courses.

As one of the insiders explained, a trainer will take a buy position with one broker and a sell position with another, and therefore the net position would be zero. Because the trainer has no clue how the security will move, he therefore bets on both sides.

If the security moves one way, then one of the trades will show a profit. If it moves the other way, then the other trading account will show a profit. Either way, the trainer will have at least one P&L statement which will show a profit and hold up to the verification test.

Also Read | MC Investigates: The two big, illegal reasons why finfluencers don't want to be SEBI-registered RAs

As a trader explained, “With one broker, he (the trainer) will sell 100 lots of Nifty futures. And using another, he will buy 100 lots. So his net position is zero. But if Nifty moves 300-400 points either way, one of his positions (buy or sell) will show big profits.”

Stock market training courses can sell at a monthly fee of anything between Rs 500 and Rs 3,000, and usually there are over 1,000 subscribers for these courses hosted on Telegram channels. That is, using a back-of-the-envelope calculation, a finfluencer could make Rs 5 lakh to Rs 3 crore a month.