In an interim order issued against Gautam S. Khandelwal (noticee) on February 23, 2017, SEBI has prohibited the noticee from dealing in securities and from disseminating news or messages in the securities market, for acting in contravention of the SEBI (Research Analyst) Regulations, 2014 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.
The noticee had subscribed to bulk SMS sending services, in his capacity as an authorized person to a registered trading member. SEBI observed that in the period under consideration, the noticee had sent around 8.40 lakh SMS(es), giving stock tips to buy shares of Supreme Tex Mart Limited (STML) at various prices. It was also found that the noticee had sold his shares in STML while inducing other investors to buy the scrip, and profited from the artificial prices created in the market. Further, the noticee had misled investors through incorrect information regarding the proposed acquisition of shares of STML by another company and by concealing the fact that STML was a sick company.
SEBI observed that the noticee, not being registered either as an investment advisor or a research analyst, could not have sent trading tips to the investors. Further, the noticee had undertaken unfair trade practises by dealing in securities in a manner contrary to the advice provided to other investors, with a fraudulent intention and an ulterior motive of generating profit from such transactions.
SEBI, has in the past, issued orders directing persons providing investment advice without registration, to cease and desist from acting as investment advisers, and impounding unlawful gains. SEBI has also issued press releases cautioning investors to deal with only SEBI-registered investment advisers and research analysts, and against trading based on tips received through SMS. SEBI’s latest effort in this regard was proposed in the consultation paper issued in October 2017 proposing amendments to the SEBI (Investment Advisers) Regulations, 2013, which seeks to bring such activities within the fold of SEBI’s anti-fraud regulations. Those proposals however are too broad.