Over Rs 12-crore earnings from unregistered advisory services impounded, three entities banned

The order also said that what “merits further examination” is also whether there was any financial arrangement between the entities and some of the brokers.

Three entities found to have given unregistered investment advice have been banned from the securities market until further notice and the fee they have made from the service--which is in excess of Rs 12 crore--has been impounded, through an interim order from the market regulator.

The entities declaring that they are not registered entities and that the channels they were running were only for educational purposes--which is what many finfluencers do to get around regulations--did not hold with the Sebi investigators.

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The order also said that what “merits further examination” is also whether there was any financial arrangement between the entities and some of the brokers, since these unregistered advisors seem to have been pushing their clients to open trading accounts with these brokerages.

Kabir Financial Services, Sayyed Shujauddin and Farhat Perween were found to have made Rs 12,84,74,628.5 (Rs Twelve Crore Eighty Four Lakh Seventy Four Thousand Six Hundred Twenty Eight and Fifty Paisa) by providing this illegal service, according to the Sebi investigators.

The Sebi whole-time member (WTM) noted, that the noticees tried to change their communication on the channels they were running, after the noticees received an email from Sebi. The WTM stated in the order, “I have noted from the chats in the Telegram channels that from February 14, 2023 onwards, after receipt of SEBI e-mail dated February 13, 2023, the company is declaring that it is not registered with SEBI and that the channel is only for educational purposes. This appears to be an attempt by the Noticees to portray that they are in belated compliance with the law.”

“Merely making statements of this nature cannot exonerate the Noticees when their actions reveal that they were and continue to be prima facie engaged in unregistered investment advisory services,” the order added.

The entities have been directed not to divert any funds raised from investors, kept in bank account(s) and/or in their custody, until further orders. They have also been told not to dispose of or alienate any assets, whether movable or immovable, or any interest or investment or charge on any of such assets held in their name, jointly or severally, including money lying in bank accounts except with the prior permission of SEBI until the impounded amount is deposited in the escrow account.

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The investigators also pointed out that the chats on Telegram channel indicate that the company was encouraging people to open trading accounts in brokerages such as Angel One / Zerodha / Upstox / Alice Blue through their link in to avail their yearly packages. Also, the chats also seem to insist that the investors trade through these brokerage accounts. The Sebi investigators believe that this “merits further examination to determine if the noticees had any financial arrangements with other market intermediaries”.

The whole-time member added, “I note from material available on record that as confirmed by the Exchanges, the noticees are not registered with any brokers as their Authorised Persons.”