Baap of Chart: Unregistered Investment Advisor Caught in Regulatory Net for Fraudulent Stock Advisory Services Disguised as Educational Courses

Key Takeaways:

• Baap of Chart used multiple layers of companies and platforms to present itself as an entity running educational courses, while in reality, it was providing buy/sell/hold recommendations in securities to its clients under the guise of providing courses related to the securities market.
• SEBI issued interim directions against Nasir, the founder of Baap of Chart, and others, including disgorging the money collected from clients and investors and restraining the entity from trading and dealing in the securities market.
• The case highlights the need for tightened regulation and increased investor awareness in the realm of financial influencers and unregistered investment advisors.

The case of Baap of Chart, an unregistered investment advisor and financial influencer who was found to be selling stock advisory services under the guise of offering educational courses. The Securities and Exchange Board of India (SEBI) has ordered disgorgement of over INR 17 crore from Mohammed Nasiruddin Ansari, the founder of Baap of Chart, and his associates for their fraudulent activities.

The key points and details from the article:

Baap of Chart’s Modus Operandi

• Baap of Chart used multiple layers of companies and platforms to present itself as an entity running educational courses, while in reality, it was providing buy/sell/hold recommendations in securities to its clients under the guise of providing courses related to the securities market.
• Nasir conducted offline workshops related to the securities market and uploaded them on YouTube with enticing titles to influence unsuspecting users to attend the workshops.
• The entity collected INR 17.2 crore by luring clients through misleading claims and prompting them to purchase “educational courses.” These students were then added to closed groups in channels including Telegram, where tips were shared with the aim of influencing them to deal in securities.

Uncovering the Scheme

• SEBI conducted a probe and analysis of certain posts on Twitter and Telegram by Nasir, the founder of Baap of Chart, and unearthed the dubious operating procedure of the fraudulent scheme.
• Razorpay, the payment aggregator for the “educational courses/workshops,” informed SEBI about the aggregator called ‘Bunch’ being onboarded on its platform, through which the payments for the courses were routed.

Involvement of Other Entities

• Golden Syndicate Ventures Pvt. Ltd. (GSVPL) was incorporated and registered with the Registrar of Companies (RoC), Hyderabad. Shareholder details were available on the website of the Ministry of Corporate Affairs.
• The role of directors and key shareholders of GSVPL, apart from Nasir, was examined, revealing their involvement in directing students to Telegram pages, managing finances, or replying to students’ questions on social media platforms.

SEBI’s Action

• SEBI issued interim directions against Nasir, not just in his personal capacity but also in his capacity as the sole proprietor of Baap of Chart. The directions included disgorging the money collected from clients and investors and restraining the entity from trading and dealing in the securities market.
• Nasir and others were given 21 days to explain their actions, after which a final order would be passed.

Social Media Response

• The news of Baap of Chart’s fraudulent activities sparked a furore on social media, with Twitterati raising concerns and questions about the refund for those who bought the courses and expressing disbelief at how people blindly followed random tutors in stock market matters.

Legal Angle

• The article mentions Regulation 3 of the IA Regulations, which provides that no person shall act as an investment adviser or hold himself out as an investment adviser unless he has obtained a certificate of registration from SEBI.
• It also discusses the consultation paper on the association of SEBI-registered intermediaries, emphasizing the need for intermediaries to follow certain guidelines and proposals related to their association with unregistered entities, client confidentiality, and disclosure of registration details.

SEBI’s Message to Finfluencers

• The article highlights SEBI’s move as bringing to the fore the manner in which finfluencers are pushing the envelope with the use of technology and various platforms available for a fee. It also emphasizes SEBI’s message to finfluencers that anyone selling or dealing with stocks must go through proper channels and regulations.

In conclusion, the case of Baap of Chart serves as a cautionary tale about the need for tightened regulation and increased investor awareness in the realm of financial influencers and unregistered investment advisors. SEBI’s actions against Baap of Chart and its associates reflect the regulatory body’s commitment to addressing fraudulent activities in the securities market.

FAQ:

Q1: What were the fraudulent activities of Baap of Chart?

A1: Baap of Chart was found to be selling stock advisory services under the guise of offering educational courses, luring clients through misleading claims and prompting them to purchase these “educational courses.”

Q2: What actions did SEBI take against Baap of Chart?

A2: SEBI issued interim directions against Nasir, the founder of Baap of Chart, and others, including disgorging the money collected from clients and investors and restraining the entity from trading and dealing in the securities market.

Q3: What are the implications of this case for the financial influencer community?

A3: The case serves as a cautionary tale for the financial influencer community, highlighting the need for tightened regulation and increased investor awareness in the realm of financial influencers and unregistered investment advisors.