Stock tips abound on Telegram and Instagram. But do all adhere to Sebi’s rules?

“Kuch to gadbad hai, Daya (Something is certainly amiss, Daya)!” ACP Pradyuman may have drawn inference to the murky world of financial influencers across social media in the reel world if ‘CID’ was tasked to investigate the labyrinthine world of online stock trading advice, where the rules are blurred and profits beckon.

However, in the real world, he is as much a part of the systemic rot, wittingly or unwittingly, as he shares screen space with ‘Captain Cool’ Mahendra Singh Dhoni in promoting a popular platform offering futures and options subscriptions by Securities and Exchange Board of India (Sebi)-registered analysts (RAs).

In fact, Instagram and Telegram channels have emerged as the modern-day saloons of the Wild West. Here, under the guise of Sebi-approved analysis, registered and unregistered entities boldly flaunt endorsements from celebrities with promises of overnight riches, all while sidestepping regulatory scrutiny.

And this murky landscape, dotted with tales of lavish vacations and promises of eye-popping returns, underscores a pressing question: Who polices the pitfalls of financial advice in the digital age?

“In cases where unregistered entities use celebrity endorsements to indirectly promote Sebi-registered analysts, the markets regulator will definitely pursue action against the registered entity,” warns Srikanth Meenakshi, co-founder of Primeinvestor.in, a Sebi-registered subscription-based research advisory firm.

However, while the regulator indeed takes a hands-on approach in ensuring compliance, the digital space is besieged by dubious practices. Take, for instance, the case of “Gap up by Rigi” and its Telegram channel, “gapup_channel_official”.

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The platform’s homepage prominently displays Dhoni announcing a “big sale” and discount codes on all Gap Up purchases. The subscription plans by RAs pop up right below the Dhoni ad, along with their images. The Telegram and Insta channels, too, carry promotional posts displaying Dhoni and Shivaji Satam, aka ACP Pradyuman.

“In case an indirect promotion is happening of a registered entity, or an individual, by an unregistered entity using a celebrity or otherwise, Sebi will go after the registered entity. Registered entities should be careful about it,” Meenakshi says.

However, Ananya Singhal, co-founder, Gap Up, dismissed the possibility of any wrongdoing, saying brand ambassadors were appointed to generate awareness about the platform and were not in any way engaged in promoting a particular RA. “Gap up by Rigi” has 363,000 followers on its Telegram channel.

“Neither the brand ambassador nor Gap Up uses the services of the brand ambassador to (a) promote services of any specifically identified RA; or (b) provide financial advice or stock tips. The role of the brand ambassador is merely to generate awareness and increase potential customers on Gap Up,” says Singhal.

Telegram: Regulatory blind spots

Surat-based Chanchal Chakrachhatri, co-founder and chief executive of tech platform Finosaurus, analysed over 50 trading-related Telegram channels to help investors track, record and assess their performance.

Mint scrutinized these channels, including those operated by registered and unregistered entities. One notable example is the Telegram channel “3MP - Safe Calls Minish Patel - SEBI Regd Research Analyst with 29 years of experience,” boasting 893,000 members, the highest in the list shared by Finosaurus.

Patel’s other channel, “3MP - High Risk Fast Calls,” holds the 15th spot with 66,000 subscribers. This “high risk” channel features videos of its research team vacationing in Switzerland and Europe, with posts claiming future trips to the US, Europe and Russia—a practice potentially breaching Sebi rules.

“Due to extraordinary performance, whole research team is going to US and Europe with family (76 people including kids). So, no messag for the period 28 May to 10 June,” read one of the posts, followed by another: “Planning to send full research team (single only) to Russia next month for 6-8 days.”

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Notably, these posts lack disclaimers. An email seeking clarification from Patel went unanswered till press time.

In another case, Kavita Agrawal, an RA, advertises portfolio management services (PMS) prominently on her website’s homepage. Clicking through reveals a Google form where she explicitly states that she is not a registered portfolio manager.

In fact, Agrawal was guarded in her response to Mint’s queries: “While a PMS licence is required for managing funds on behalf of clients, I currently do not offer that service. Instead, I provide a copy trading service to personal acquaintances. I use the term PMS for ease of understanding for my acquaintances.”

Curious about copy trading? “Well, copy trading involves replicating the same stock trades held in an RA’s personal account,” explained Abhishek Mishra, a practicing company secretary.

For Agrawal, this service involves accessing clients’ brokerage account logins, highlighting potential risks and regulatory considerations.

In fact, on 30 April, Sebi had imposed penalties on five entities associated with Allied Financial Services Pvt. Ltd for similar offences—providing unregistered PMS.

Screenshots of past performance

Agrawal’s Telegram channel, with 6,693 members, features posts highlighting past performances, such as: “Stock Idea: HAL. Exclusively in the Exclusive Plan. Achieved 26.2% performance in 13 days.”

Similarly, 'Livelong Hari Sebi Regd Signals’ has posts including: “More than double done in a single trade. jackpot trade done in hero zero channel.”

“Sebi-registered analysts cannot make boastful claims about past performance to advertise their offerings,” says Meenakshi. But who cares!

Agrawal argued that the message "is not misleading, not false, and includes a disclaimer in the attached link". "Furthermore, this is shared within my own Telegram channel, which is a curated community of members who have chosen to be part of it and are interested in knowing about my activities," she reasoned.

That’s not all, some even share screenshots of conversations where clients thank them for advice that led to profits.

“Such screenshotscan violate Sebi regulations for registered RAs. Such actions may constitute misleading statements, exaggerated claims, and references to past performance, all of which are prohibited under Sebi’s advertisement code for RAs," said Prithiviraj Senthil Nathan, partner, King Stubb & Kasiva, Advocates and Attorneys.

“This includes not only direct promises of assured returns but also any communication that creates unrealistic expectations or fails to disclose the associated risks adequately. Sebi Master Circular for Research Analysts, 2023 restricts this as well,” he added.

Stockpro Online, the fourth on the list with about 274,000 members, is operated by Seema Jain, a Sebi-registered analyst. Although Jain shared a disclaimer with her posts: "Please consult your financial advisor before investing. All research for educational purposes only”, Mint's email seeking clarifications on the lack of adequate disclosure on her trading calls, did not elicit a response till press time.

“All RAs are expected to disclose ownership in the stock recommendation, if any. They should not be trading into that security 30 days prior to the recommendation and five days after the recommendation,” says Meenakshi.

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The unregistered world

That said, more harm is caused by unregistered entities, often impersonating Sebi-registered firms or well-known personalities to deceive people.

For instance, a Telegram channel, named Sarvesh Gutti (SMI) || SEBI®, has multiple posts claiming “Get Returns in 3-5 hours,” promising a profit of ₹45,000 on an investment of ₹10,000.

An email inquiry to Gutti revealed it to be a fraudulent account. “These are fake accounts operated under my name. I have lodged a complaint with the cyber cell and informed Sebi about these accounts. Also, I have reported them to Telegram, but no action has been taken so far,” Gutti claimed.

Ads featuring images of famous personalities on Instagram are also prevalent. Reporting these fake accounts is challenging, as the personalities often do not have official Instagram accounts.

Instagram requires users to identify and select the personal account being replicated, highlighting a systemic flaw in the process.

The pitfalls don’t end here, but instead get even scarier!

“EVERYDAY PROFITS”, “TradeLikeBerlin”, “Vijay wealth advisor” and “BULLS VS BEARS” from the Finosaurus list are not registered with Sebi, and they clearly say so on their channel description. They claim to offer personal account handling for channel members on a profit-sharing basis.

The channel owners request account login and password details from members and claim to trade on their behalf. While the profits are shared, the losses are not. To share an example, a post on “vijaywealthofficial2020” says: “We again rocked in our account handling service like always, Jackpot Profits Booked. 100% + profit, 100% consistency & 100% satisfaction.”

Mint could not reach out to the owners of these channels as their information is not publicly available.

“TradeLikeBerlin” is run by Ujjwal Pandey. His name search on the Sebi website yielded no results. His Instagram channel suggests he is a trader.

All four share tonnes of profits and loss (P&L) screenshots that show profits, but there is no way to verify if those claims are genuine.

The non-registered entities tend to hide behind the disclaimer ‘for education purpose only’ when sharing stock tips. Does it make them legal?

“It is completely illegal. What educational purpose does a stock recommendation serve? You are not educating about the stock. You are giving a call of action. Sebi is in discussions with platforms such as Facebook, Telegram and WhatsApp to take action against non-registered entities. It is a difficult proposition because they make money with high volume activities in such groups. If the Telegrams and Facebooks of the world do not take action, they themselves could be held accountable by Sebi,” says Meenakshi of Primeinvestor.in.

That said, investors acting on stock tips by non-registered entities should do so at their own risk. “Don’t complain later on if you make losses saying that the regulator and the government did not do their job,” Meenakshi adds.

Notably, the activities of unregistered entities who provide catchy and engaging financial advice and insights to their followers contravene Section 12A of the Sebi Act, 1992, and Regulation 4 of the Sebi (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, says Suhana Islam Murshedd, Partner, AQUILAW.

“Section 15HA of the SEBI Act, 1992 penalizes such fraudulent or unfair trade practices by any person with a fine of ₹5 lakh extendable up to ₹25 crore or three times the profit made out of such practices, whichever is higher,” she adds.

Not all channels are flouting the rules. In the Finosaurus list, “Angel One Advisory,” with some 395,000 members, is in second spot in terms of number of subscribers. The fifth channel on the list is “Index trading with CA Nitin Murarka (SMC).” Murarka is the head, research (derivatives), at SMC Global.

The sixth one on the list with around 186,000 members, is “Motilal Oswal - Official.”

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The three channels are mindful of the regulations. All posts on Angel One and Motilal Oswal contain disclosures in the form of a PDF. “Our channel focuses solely on index trading only (no stocks recommendation), providing well-reasoned trade ideas with clear logic. We also provide disclosure in the descriptions of the channel,” says Murarka.

SMC Global is actively taking actions against impersonators. “We’re proactively informing our followers about impersonator accounts by sharing examples and warnings. We report fake accounts directly to Telegram to facilitate their takedown. Moreover, we’ve partnered with an agency to expedite the identification and blocking of fake channels through direct coordination with Telegram,” says Murarka.

Strict regulatory action is needed to keep a check on unregistered entities as well as registered entities compromising the rules.

Mint take: Avoid associating with unregistered entities offering stock tips. Always ask for the Sebi registration number from people claiming to be registered with the markets regulator. Check the registration number on its website to fetch the registered contact details. Reach out on an official mail ID or phone number before following stock tips or taking premium subscriptions.