Live market stock trading: SEBI cracks down on fake stock market gurus!

In several orders, SEBI has said that investment advice cannot be given under the garb of education

Live-trading sessions have been the pull factor for various stock market training gurus.

The latest circular issued by the Securities and Exchange Board of India (SEBI) on January 29, clarifying provisions relating to the association of regulated entities and persons engaged in prohibited activities, has put a stop to this.

Stock market schools such as Avadhut Sathe Trading Academy or ASTA, and Asmita Patel Global School of Trading, had become popular on the back of live-trading or real-time market sessions.

There has been a rising retail interest in stock market following the pandemic. With the stock market seeing record highs and easier onboarding process, retail investor numbers have boomed. This surge had given rise to various financial businesses including of social-media influencers who explained financial terms and quickly transformed into giving stock-market tips, and of institutes that offered to train people in trading (more than investing).

Also read: SEBI delivers deathblow to finfluencers, stops running unregistered advisories under garb of education

One of the big draws for these entities was their live-market trades. This largely involved the teacher trading on his/her terminal or even a big screen (at live events) and students copying the trades.

This resulted, for all purposes, in people who are not registered with SEBI as Investment Advisor or Research Analyst giving investment advice or trading calls.

In several orders, SEBI has said that investment advice cannot be given under the garb of education. Apart from illegal advisories, sources suggest that SEBI has also been concerned about manipulative practices such as pump-and-dump and counter-trades by finfluencers and trainers. But the market regulator had not explicitly stated what distinguished investment advisory from investment education.

In the latest circular, regulator has addressed this gap and said that investment education is not prohibited but those providing it will need to use market prices with a three month lag.

Screen-share tactics

SEBI has been trying to approach this problem from various angles, going by the regulator's earlier directions.

In May 2024, SEBI issued a circular restricting the use of live-market data. The market regulator had said that brokerages should share live market data with third parties only when it is necessary for the orderly functioning of the securities market or for fulfilling regulatory requirements. The regulator also said that market-price data can be shared for investor education but with a lag of one day.

But unscrupulous stock market trainers and finfluencers found a way to get around that too. They would share their trading info by projecting their trading screen onto a bigger screen or sharing their trading screen on YouTube.

With the latest circular, SEBI has plugged that loophole too, by saying that educators cannot display or screen share live market data.