Indian market regulator Securities And Exchange Board Of India (SEBI) has issued an ad interim ex parte order against three illegal investment advisors –Rishabh Jain, Ubaidur Rahman and G. Kadar Hussain. The trio has been alleged for a fraud of over INR 10 Cr and SEBI has directed them to cease and desist from acting as an investment advisor.
The action comes after SEBI received an email complaint on December 18, 2015 from National Stock Exchange of India Ltd. (NSE), which forwarded the details of a website viz. trade4target alleging unregistered investment advisory service through the said website in which stock options and commodity tips were provided.
The SEBI order established that certain websites and individuals were allegedly offering unregistered investment advisory services, but in reality they were running the operations without obtaining the SEBI registration as an Investment Adviser under SEBI (Investment Advisers) Regulations 2013. On the contrary, they claimed through their websites that they are SEBI-registered Advisory firms.
On the examination over the past few years and multiple complaints against the websites owned and operated by Jain, Rahman and Hussain, SEBI has barred 12 websites namely:
The order dated March 20, 2019, against Rishabh Jain, Ubaidur Rahman and G. Kadar Hussain is also to be treated as a show cause notice.
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Why Show Cause Notice?
They may show cause as to why, for the violation observed against them in this order, appropriate directions, under sections 11, 11B and 11D of the SEBI Act and relevant SEBI Rules/Regulations should not be issued against them, including directions to continue the prohibition on them from buying, selling or otherwise dealing in securities market, either directly or indirectly, in any manner whatsoever, for a particular period.
Further they may also show cause as to why any direction to refund the amounts collected from the investors/clients through various websites / schemes should not be issued against them under sections 11(1) and 11B of SEBI Act.
The Whole Time Member of SEBI, Madhabi Puri Buch, passed the order which observed that “the Noticees create unregistered investment advisory websites periodically and lure investors by promising assured monthly income with unbelievable returns of 300-800% on buying and selling of securities based on the tips provided by them.
Once the subscription is received, the Noticees either give stock tips for few days to the subscribers and then stop entertaining their calls, or avoid the calls of the subscribers entirely without giving any stock tips.”
SEBI also found that the accused were running a portal tradingtipscomplaints.com, which was portrayed as the website to get refund from capital loss on trading tips and subscription money paid to trading tips provider.
The order said, “It is however noted that the website is managed for the purpose of promoting websites owned by them. They themselves post positive reviews and testimonials of getting unbelievable returns from the unregistered investment advisory websites on www.tradingtipscomplaints.com to promote subscriptions”.
As the country gets online and relies more on technology and the market sees fintech revolution, cases like these raise questions on the management and the loss of trust such cases create in the market.