Nithin Kamath, CEO of Zerodha, on December 7 reminded investors over ‘X’ (twitter) about an “old saying” that cautioned to not take shortcuts for quick money in the stock market, mentioning it as the surest way to lose money.
He referred to two recent orders from the Securities and Exchange Board of India (SEBI) as examples to highlight the risks of such approaches. The orders were , “Order in the matter of Trafiksol ITS Technologies Ltd” and “Final Order in the matter of unregistered investment advisory activities by Baap of Chart.”
Kamath took to X (formerly Twitter) to share details about “two different scams”. He wrote “SEBI recently passed two orders related to two different scams. In the first scam, an SME company raised ₹44 crores through an SME-IPO to buy software, among other things. But, the company that it was buying software from was a shell company complete with fake financials and a fake list of clients,”
He added,”The second order was against a popular finfluencer who collected Rs 17 crores by selling courses, seminars, etc. This just proves that old saying: if something is too good to be true, it almost always is. Taking shortcuts to make a quick buck is the surest way to lose money in the markets,”.
Kamath seems to be referring to SEBI’s action against the newly listed Trafiksol ITS Technologies. On December 3, the market regulator ordered the company to refund the investor’s money paid to subscribe to its IPO. SEBI also directed Trafiksol to return the interest earned on the funds to investors who were allotted shares in the IPO.
The IPO for Trafiksol ITS Technologies was launched on September 10 to raise Rs 44.87 crore. The issue was subscribed, a whopping 345 times.
After the IPO closed, SEBI received a complaint alleging that one of the objectives of the issue was to purchase software worth nearly Rs 18 crore from a vendor with questionable financials. The vendor had even failed to file its annual financial statements with the Ministry of Corporate Affairs as per the recent SEBI order and its investigation.
BSE, in consultation with SEBI had deferred the listing of Trafiksol’s shares, which was originally scheduled for September 17.
The second case Kamath referred to appears to involve SEBI’s recent action against a well-known social media financial influencer. The regulator ordered the operators of the ‘Baap of Chart’ platform to refund more than Rs 17 crore to investors for offering unregistered investment advisory services.
SEBI has given them a three-month deadline to complete the refunds and instructed that the repayments be made through bank transfers to ensure proper documentation and an audit trail.
“In my view, unregistered investment advisors like Nasir can put investors at great risk by misleading them. Without holding any registered IA certificate, Nasir aided and abetted by the remaining noticees, provided investment advisory services and promised unrealistic returns to investors with the objective of raising money through course fees,” said Amarjeet Singh, a member at SEBI in the order.