Mobilising investors and luring them into their investment schemes through Short Message Services (SMSs) has become a common practice in both investment advisory and fund management space. While representatives of well-known registered firms also update investors about their schemes, it has become a grey area and investors need to be very careful before they fall into a trap and end up losing their hard earned money.
Having passed several orders against illegitimate collective investment schemes such as that of Saradha Group, Sumangal Industries and Rose Valley Group among others over the last few months, Sebi last week passed an order against certain entities that were engaged in offering investment advisory and portfolio management services through Short Message Services (SMSs) without getting themselves registered with the market regulator.
In its order dated August 20, 2013, passed against Imtiyaz Hanif Khanda (proprietor of Right Trade and Sai Traders) and Vali Mamad Habib Ghaniwala (proprietor of Bull Trader and Laxmi Traders), Sebi banned the entities from acting as investment advisors and portfolio managers and further ordered to withdraw all advertisements in relation to any unregistered activity they have in the securities market.
The companies were sending messages through mobile phones and one such message said, “If you want to earn daily 5,000 to 75,000 in equity and MCX market with our confirm intraday tips contact now for sure shot call at 09638912434.”
The website of Right Trade said, “We create and manage your portfolio with short term and long term returns using fundamental analysis and our experience..... charges and return (%) will depend on investment amount....FII-based calls are also available with portfolio management service.”
While the entities were not registered with Sebi to provide the claimed services, Sebi through its investigation established that Khanda and Ghaniwala were engaged in providing investment advisory services to investors on payment of fees. The two through their entities gave intraday tips, stock specific recommendations to investors on a contractual basis on payment of fees. Khanda’s firm was also acting as a portfolio manager without being registered with Sebi as a portfolio manager. Sebi, in its order, said that the entities were involved in fraudulent activities as they made misrepresentation and false statements, etc on their websites to lure investors.
In its order, Sebi also raised an alarm. “I also take this opportunity to caution investors to take their informed investment decisions without being influenced by such messages and advices and to deal with only intermediaries registered with Sebi,” said Rajeev Kumar Agarwal, whole-time member of Sebi in the order which further stated that the bank account details provided on the website of the entities received cash deposits from various parts of the country against the services they were offering.
While Sebi has cautioned and is taking action against such individuals involved in fraud, investors need to keep their greed aside and take informed investment decisions.
When it comes to physical health individuals generally do their due diligence to figure out a good, qualified doctor, the same practice should be adopted while picking a doctor for your financial health.
Do some basic checks before you give someone your money to manage or seek someone’s advice.
Is the entity registered with the regulator? Are the returns being promised, realistic? Check on where your funds are being parked. Seek the help of a professional.
Investors can also call on Sebi’s toll free helpline service number 1800 266 7575 or 1800 22 7575 for queries relating to securities market such as query on status of a company and registered intermediaries with Sebi, etc.
A basic check will help you take a more informed decision on your planned investment and thereby safeguard yourself against fraudulent practices prevalent in the market. A large number of investors have lost their money chasing high returns in quick time through illegitimate schemes.
According to an estimate by Sebi, illegally run collective investment schemes have mobilised over Rs 10,000 crore from investors across the country. Also investments worth Rs 5,500 crore of around 13,000 investors are stuck for settlement with National Spot Exchange Limited as they too were chasing high assured returns.
Be prudent in your investment behaviour and realistic in your return expectation.