Taking action against unregistered finfluencers, the Securities and Exchange Board of India (SEBI) barred Hyderabad-based financial influencer Mohammad Nasiruddin Ansari from participating in securities markets on Wednesday, October 25.

The regulator also mandated the disgorgement of INR 17.2 Cr from Ansari, who operated under the online handle ‘Baap of Chart’, accusing him of luring investors with false and misleading information and offering unregistered investment advisory services.

“It is prima facie concluded that Noticees have collected an amount of INR 17,20,76,616.09 during the period January 2021 – July 2023 by luring clients/ investors through misleading/ false information to purchase his courses/ workshops, adding them in their closed groups and inducing/ influencing them to deal in securities,” said an official SEBI order.

Baap of Chart — Modus Operandi

The ‘Baap of Chart’ account has more than 4.43 Lakh subscribers on YouTube and 83,000 followers on X (formerly Twitter).

In its order, SEBI observed that Ansari offered trading recommendations to hundreds of users online under the ‘garb of educational courses’ which were also chargeable.

SEBI launched an investigation to determine if Nasir has been providing unregistered investment advisory services through social media, potentially violating SEBI’s investment advisory regulations and the SEBI Act 1992. The investigation covers the period from January 1, 2021, to July 7, 2023.

SEBI’s investigation uncovered that Ansari was actively dispensing stock recommendations (both buying and selling) under the pseudonym “BoC” across a range of social media platforms, including YouTube, X (formerly Twitter), Instagram, WhatsApp, and Telegram.

To further this operation, he encouraged investors to sign up for what he labeled as “educational courses.” These courses were accessible through a website and mobile applications available on Google Play and Apple’s App Store, with the platform being facilitated by Bunch Microtechnologies Pvt Ltd (Bunch).

Contrary to his claims of achieving 20-30% profits and maintaining a 95% accuracy rate, the investigation uncovered a net trading loss of INR 2.89 Cr incurred by Nasir between January 2021 and July 2023.

“Nasir, who claims to provide strategies for trading that would lead to 200-300 per cent profit or assured or near-assured returns, has actually incurred a net loss of INR 2.89 Cr through trading in securities and has concealed such facts from the investors in his videos, workshops, and groups,” SEBI said.

Funds collected from investors were directed to various bank accounts, including those belonging to Ansari, BoC, Golden Syndicate Ventures Pvt Ltd (in which Ansari has a significant stake), and P Rahul Rao (another major shareholder in Golden Syndicate Ventures). SEBI named these individuals in its order, alleging that they were engaged in unauthorized investment advisory activities.

“Noticees shall cease and desist from acting as or holding themselves out to be investment advisors, whether using ‘Baap of Chart’ or otherwise. They shall cease to solicit or undertake such activity or any other unregistered or fraudulent activity in the securities market, directly or
indirectly, in any manner whatsoever,” SEBI said in its order.

SEBI has imposed restrictions on Ansari, Rahul Rao, and Golden Syndicate Ventures, prohibiting them from engaging in the buying, selling, or dealing of securities, either directly or indirectly. Furthermore, these individuals and entities have been instructed to deposit INR 17.2 Cr into an escrow account with a scheduled commercial bank within a 15-day period.

Finfluencers Under Scrutiny

According to the market regulator, ‘finfluencers’ are individuals who disseminate information and advice on various financial topics through social and digital media platforms, thereby influencing the financial decisions of their followers. Social media’s investment advisory landscape is increasingly populated by “financial gurus” and “finfluencers.”

While some offer valuable insights without charge, concerns have arisen regarding misinformation, promoting stocks for personal gain, receiving alleged kickbacks, and billing individuals for advisory services. These practices call into question the integrity of financial advice given on social media platforms.

Last month, SEBI Chief Madhabi Puri Buch advised finfluencers wishing to deal in securities or collaborate with regulated entities to register with the board.

SEBI also floated a consultation paper on August 25, which introduced a proposal to limit interactions between regulated entities and unregistered finfluencers. The market regulator has invited public comments on the proposals which can be submitted by September 15.