RA tries to get around various regulations with single disclaimer; SEBI disagrees, issues fine

The Adjudicating Officer cited the SEBI circular that says that advertisements should not contain any misleading or deceptive testimonials.

A research analyst tried to get around various violations of regulations--such as assuring profits, citing past performance and using misleading testimonials--with a single disclaimer about market risk.

It didn't work.

In an order issued on December 24, the Securities and Exchange Board of India (SEBI) fined Sameer Pande, the proprietor of Niftypro Trading Research, Rs 2 lakh.

In the order, SEBI's Adjudicating Officer Asha Shetty wrote, "I note that the violations observed in preceding paragraphs viz. making the promises of assured profits / returns, providing the profit calculations, making reference to the past performances, using the misleading testimonial and prohibited words in the advertisements etc. and giving disclaimer / informing the clients are two different propositions."

She wrote, "Further, informing the clients or making them aware about risks involved in the securities market is a responsibility of a SEBI registered RA. However, giving the disclaimers by the Noticee regrading risks involved in the securities market does not mean that the Noticee (Sameer Pande), at the same time, can make the

promises of assured profits / returns to the clients and use the misleading testimonial and prohibited words in the advertisements."

The market regulator's investigations had shown that RA's website www.niftypro.in carried statements that promised "90% accuracy" and "you can generate consistent profits across markets irrespective of the volatilility".

The website also carried testimonials from clients, which included one that said that the client has been able "to earn consistently unexpected returns".

Commenting on this, the Adjudicating Officer cited the SEBI circular that says that advertisements should not contain any misleading or deceptive testimonials.

Shetty wrote, "In my view, the possibility of earning the unexpected returns consistently, as claimed in the said testimonials, is very rare and scarce in the stock market and displaying such kind of testimonial on website of the Noticee (Pande) is misleading and deceptive to the investors".

She also cited the message on the RA's website that urged an investor to "Book your profit todayby research based recommendations". The order stated, "the said assertive statement mentioned by the Noticee indicates RA’s assurance to the investors of booking the profit on same day of registration / availing his services".

The SEBI investigation also showed that the sales representatives of the RA also told clients that they be sure of profits in the range of Rs 7,000 to Rs 10,000 from a capital of Rs 20,000 to Rs 25,000. To this, the RA said that the information was sourced from an "internal lead generation sheet" and was not a client-facing document.

Shetty wrote that this contention could not be accepted since it was taken from "calls of the RA's sales representatives with potential clients"