SEBI Cracks Down On Finfluencers, ‘Baap of Chart’ & 7 Others Banned For 1 Year, Directs 17.2 Crore Refund

The Securities and Exchange Board of India (SEBI) has intensified its regulatory clampdown on financial influencers (finfluencers), taking decisive action against Mohammed Nasiruddin Ansari, better known by his online alias 'Baap of Chart.' In a landmark order issued on December 2, the market regulator banned Ansari from the securities market for one year and six of his associates for six months, while directing them to refund Rs 17.2 crore collected through unregistered investment advisory services.

The Case Against 'Baap of Chart'

Ansari, a prominent figure on social media platform X (formerly Twitter), marketed himself as a stock market expert, providing buy and sell recommendations disguised as educational training. However, SEBI's investigation found that Ansari, along with his associates, ran unregistered investment advisory services, misleading investors with promises of unrealistic returns.

Ansari's operations primarily targeted novice investors, drawn in by flashy YouTube trailer videos that showcased exaggerated claims of high profits. SEBI observed that these theatrics were designed to create an illusion of guaranteed success, enticing unsuspecting individuals to enrol in his courses and engage in securities trading under his guidance.

SEBI's Whole-Time Member Amarjeet Singh, in the final order, highlighted the deceptive nature of Ansari's operations. "Without holding any registered IA certificate, Nasir, aided by his associates, provided investment advisory services, promising unrealistic returns to investors," Singh stated.

Despite incurring personal trading losses of Rs 2.89 crore between January 2021 and July 2023, Ansari misrepresented his track record. His website boasted a proprietary algorithm with a "95% profit accuracy" and claimed it could deliver profits "day after day, eliminating any chance of overall loss." SEBI found no evidence supporting these claims. Instead, investors were lured with promises of assured returns and real-time trading guidance, oblivious to Ansari's actual financial performance.

Ansari attributed his trading losses to personal challenges, time constraints, and market volatility but failed to disclose these realities to his clients. "Investors were misled about Nasir's success in the securities market," SEBI noted, emphasizing the breach of trust and regulatory norms.

Aiding and Abetting the Fraud

SEBI's order identified six other entities complicit in the fraudulent operations:
Rahul Rao Padamati
Tabraiz Abdullah
Asif Iqbal Wani
Golden Syndicate Ventures Pvt Ltd (GSVPL)
Mansha Abdullah
Jadav Vamshi

These individuals and entities played roles in promoting the unregistered advisory services and handling the illegal proceeds. SEBI found that Ansari and his associates collected Rs 17.2 crore in fees for unregistered advisory activities, violating market regulations and investment advisory norms.

Financial Penalties and Refund Mandate

In addition to market bans, SEBI imposed financial penalties on all involved. Ansari was fined Rs 20 lakh, while his six associates received penalties of Rs 2 lakh each. Ansari and GSVPL were also held accountable for the lion's share of the refund, amounting to Rs 16.89 crore.

SEBI mandated that the Rs 17.2 crore collected from investors be refunded within three months. The proceeds, deemed illegal, are to be returned to the affected clients through an escrow account.

Regulatory Violations and Legal Implications

The case dates back to an interim order issued by SEBI in October 2023, where Ansari and his associates were found prima facie guilty of violating Investment Advisers (IA) norms and the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations. The latest order is a culmination of the proceedings.

SEBI also noted non-compliance with interim directives by Ansari, Padamati, and GSVPL, who failed to deposit the illegal proceeds in an escrow account as instructed.

Investor Risks and Market Implications

Amarjeet Singh stressed the dangers posed by unregistered investment advisors like Ansari. "Such individuals put investors at great risk by misleading them with false promises. The exaggerated claims and theatrics used to lure clients highlight the urgency of regulatory vigilance in protecting investors," Singh stated.

The crackdown comes amid SEBI's broader effort to regulate finfluencers who exploit social media platforms to offer unauthorized financial advice. By penalizing high-profile cases like 'Baap of Chart,' SEBI aims to deter similar fraudulent activities and restore investor confidence in the securities market.