Share Trading Educational Frauds

There is a thin line difference between the Investment Adviser and the Research Analyst, “If the trading call is provided after the risk profiling of the client and product suitability assessment, such trading calls are on “one to one” basis and shall come under the purview of IA Regulations. If the trading call is provided without any risk profiling of the client and product suitability assessment, such trading calls are on “one to many” basis and shall come under the purview of RA Regulations”. Handling of trading account related activities – Research Analyst cannot handle trading accounts of the client. Whereas, a SEBI registered Investment Advisor is permitted to handhold his clients.

Now many unregulated entities (entities not registered with SEBI) have been providing the services which a SEBI registered Research analyst or Investment advisor can provide. Additionally these unregulated entities also provide portfolio management services, which can be provided by a Portfolio Manager (PM), registered with SEBI. These people use titles like “NISM Certified”, “Not SEBI registered” etc. In the eyes of SEBI, this is illegal activity and can attract penalty and debar from accessing the securities market.

SEBI registered Research analyst, Investment advisors or Unregistered entities have been promoting on social media under the guise of “Video made for educational purposes only”. SEBI has issued guidelines on what constituted Educational material. Accordingly, a circular SEBI/HO/MIRSD/ MIRSD-PoD-1/P/CIR/2025/11, dated 29th January 2025 is issued. This circular through Annexure A, in FAQ format, answer to question no 8, clarifies what constitute educational services. It is produced below: 8. What distinguishes education and advice/recommendation? A person engaged solely in education shall mean that such person is not engaged in any of the two prohibited activities. Such person should not be using the market price data of the preceding three months to speak/talk/display the name of any security including using any code name of the security in his/her talk/speech, video, ticker, screen share etc. indicating the future price, advice or recommendation related to security or securities.

The two prohibited activities referred to in this answer are (i) providing advice or any recommendation, directly or indirectly, in respect of or related to a security or securities, without being registered with or otherwise permitted by the Board to provide such advice or recommendation; and (ii) making any claim, of returns or performance expressly or impliedly, in respect of or related to a security or securities, without being permitted by the Board to make such a claim.

Conclusion : For those who are interested in making Educational videos, ads or presentations on social media etc must refer to the Annexure A, in FAQ format, answer to question no 8, of the circular.

The author can be reached at https://dhandasikho.online/

CA Rohit Tendulkar