Moneylife wrote about VPS Advisory that was promising 20% assured return from stock trading. Taking cognisance of the article, SEBI initiated a probe and after two years, barred the firm from offering PMS and collecting money from investors
Two years after Moneylife wrote about an advisory firm promising 20% return
from stock market trading, regulator Securities Exchange Board of India (SEBI) has taken action against VPS Advisory Services and its proprietor Varun Pratap Singh. In an ex-parte order, SEBI has asked VPS Advisory and Singh not to collect funds and offer portfolio management services (PMS) to clients without obtaining due registration from the market regulator.
In an order
, S Raman, whole time member of SEBI said, "...steps have to be taken in the instant matter to prevent VPS from soliciting and collecting funds from investors and carrying on portfolio management services without due registration from SEBI. It becomes necessary for SEBI to take urgent preventive action. In light of the same, I find there is no other alternative but to take recourse through an ad interim ex-parte order against VPS for preventing it from collecting funds and offering portfolio management activities without obtaining registration from SEBI in accordance with the law."
Taking cognisance of Moneylife article published in June 2013
, the market regulator states, "SEBI came across an article dated 25 June 2013, published in "Moneylife" regarding the activities of VPS Advisory Services wherein it was alleged that VPS had promised 20% returns on the investments. It was observed from its website viz., www.vpsadvisory.com that VPS offers various investment advisory services to the investors."
After going through all the documents and information available on record, SEBI observed that:
i. VPS is a proprietorship firm, established on 6 December 2013 by Shri Varun Pratap Singh as the proprietor and having its office at A-65, Govindpuri, Gwalior, Madhya Pradesh. However, VPS was running its business from Bangalore from A1, Ist Floor, Savithri Residency, No. 51 & 52, Yellapa Garden, Bangalore - 560085. Shri Varun Pratap Singh was a registered sub-broker of Sharekhan in the trade name Bangalore Consultancy Services till November 2013.
ii. VPS vide letter dated 19 December 2013 and email dated 11 June 2014 stated that VPS provided Portfolio Management Services a few clients. It was also stated "PMS Services were started on the requests on the request of the clients. The Service was started from March 2012 and stopped in December 2013'. During this tenure we have published various clients’ demat account on our website which shows the performance of the PMS services."
iii. VPS is collecting funds from investors and manages their funds by investing in derivatives segment;
iv. VPS was providing advisory services in cash, derivative segments and also in commodity markets. Fee structure for availing advisory services was stated as Rs10,000 per month for cash and derivative segment and Rs5,000 per month for commodities.
v. Five employees were engaged in providing advisory services to 58 clients in last six months.
vi. Guaranteed returns were offered to its clients.
vii. Trading was done through the trading accounts of the clients availing PMS from VPS.
viii. PMS were offered by VPS since March 2012 and most of the clients were individuals. On the basis of the information furnished by VPS, it is apparent that PMS were offered to at least nine clients. From the analysis of Bank statements provided by various banks, it is observed that there are several deposits into the bank accounts from many clients, which are equivalent to the fees charged by VPS for various advisory services offered by VPS.
Raman, SEBI's whole time member, said, "As per VPS's own admissions vide emails dated 11th June and 14 July 2014, he used to provide portfolio management services to its clients. In this regard, it is also noted from the bank statements that various clients had paid fees to VPS for the services availed. In the light the above discussions and analysis, I conclude that the activities carried out by VPS clearly falls under the definition of "portfolio manager" specified under Regulation 2(cb) of PMS Regulations. Further, VPS was also offering guaranteed returns to general public. VPS is engaged in providing portfolio management services to investors without necessary registration for the same as mandated by Section 12(1) of Securities and Exchange Board of India Act, 1992 read with Regulation 3 of PMS Regulations."
This is not the first time we wrote about such firms big on ‘guarantees’ with promises of lavish and ‘assured’ returns. We had first exposed about the Stockguru scam
, which promised investors 120% returns, way back in 2010, but regulators did nothing then. Three years later, Stock Guru duped investors to the extent of Rs1,500 crore, mainly because of no action from regulators. Stockguru was offering Rs22,000 on an investment of Rs10,000 in one year, and called itself investment advisors. Unfortunately, the lack of financial literacy and regulation meant investors fell for it. And lost money.