Illegal advisory plays 'greater-cause', 'investor-education' card; Sebi says 'immaterial', orders refund

The price of the company's advisory packages ranged between Rs 4,800 and Rs 55,000 with varying durations.

An entity found to have been providing unregistered advisory services, and which admittedly earned nearly Rs 1.4 crore from it, asked to be spared penal action because he had spent “money, energy and time” to the “greater cause of Investor Education”.

Profit Your Trade, a proprietorial firm of Patibandla Venkata Vasanta Kumar, submitted that it had conducted more than 100 workshops/seminars over 14 years “without any support from the Government/private market participants” and that even its illegal advisory service was primarily “to spread awareness and educate Telugu speaking investors”.

The market regulator does not seem to have been impressed.

An order passed by the Securities and Exchange Board of India (Sebi) on August 24 stated that the purpose was “immaterial”. The regulator has asked the firm to return the money collected for advisory service and fined it Rs 4 lakh.

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The order stated, “Once it has been established that the Noticee (Profit Your Trade) has acted in that capacity, without having any certificate of registration to act as an Investment Advisor and by way of acting as an unregistered investment advisor has collected an amount of Rs. 1,39,96,733/- towards subscription fees for various packages offered… the purpose for which the monies are being used by the Noticee does not mitigate and / or absolve the Noticee from the violations of the provisions of securities laws.”

It added, “In view of the same, I find that the said submission of the Noticee is devoid of any merit.”

The firm made a “bald submission” that it was in the process of getting registered as an Investment Advisor, without backing it with any documentary evidence.

“The factum of filing an application cannot absolve the Noticee from the activities carried out by it without having a certificate of registration,” said the order.

The regulator had started the investigation into the company after it received complaints about this illegal advisory but its officials found that the firm’s website, which advertise this service, had become inoperative.

But, on digging deeper, the officials found that the website was launched in 2015 with webpages showing that the firm was providing services such as ‘positional trades’, ‘fundamental research’, ‘small cap select’ and so on. The price of these packages ranged between Rs 4,800 and Rs 55,000 with varying durations.

Though credits made to the bank account linked to the firm, between December 2015 and April 2022, totalled more than Rs 6.48 crore, only Rs 1.39 crore was found to have been linked to the advisory service.