Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of ₹30 lakh on OnePaper Research Analysts Pvt Ltd for assuring returns to investors, mis-selling research services and failing to maintain adequate supervisory controls over its employees.
In an
order passed by Amit Kapoor, adjudicating officer (AO) of SEBI, the market regulator found that the Bengaluru-based research analyst (RA) entity had violated provisions of the SEBI Act, the Research Analysts Regulations, the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations and SEBI's advertisement code.
The case arose from a surprise inspection conducted by SEBI in March 2024. During the inspection, SEBI officials found that the company did not maintain call recordings or records of employee communications with clients, despite having a large sales force and thousands of subscribers.
SEBI's findings were supported by investor complaints received through the SCORES platform. Several complainants submitted screenshots of WhatsApp conversations in which company employees allegedly advised clients to hold losing positions, modify stop-loss levels, take additional exposure and, in some cases, assured recovery of losses through future trades.
According to the order, one employee told a client that losses would be recovered in subsequent trades, while another assured a client that losses would be covered and profits generated thereafter. SEBI held that such assurances amounted to misleading inducements capable of influencing investors' decisions in the securities market.
The regulator also noted that several communications were made by employees who were neither registered research analysts nor holders of the required National Institute of Securities Markets (NISM) certifications. These employees were found advising clients on targets, stop-loss levels and trading strategies, activities that fell outside their permitted role.
OnePaper Research Analysts argued that its internal policy allowed research recommendations to be disseminated only through SMS and that employees had violated this policy by using their personal WhatsApp accounts without management approval. The company also claimed that it had subsequently issued warning letters to employees who had breached the policy.
Rejecting the defence, SEBI observed that mere policies on paper do not discharge a regulated entity of its compliance obligations. The AO noted that the company had failed to establish effective monitoring systems to ensure adherence to its own policies and regulatory requirements.
SEBI further pointed out that during the inspection, a company employee, in the presence of the inspectors, assured a prospective client of good returns if the prospective client subscribed to the firm's services. The incident reinforced the regulator's conclusion that assurances of returns were being used as a sales tool.
The order records that OnePaper Research Analysts employed around 100 sales executives, with only two research analysts, and serviced more than 6,700 clients across various subscription plans. Given the scale of operations, SEBI held that the company ought to have deployed robust internal controls to prevent mis-selling and monitor client communications.
Having established the violations, SEBI concluded that the company had engaged in mis-selling of securities market services, disseminated misleading information, and failed to exercise the due skill, care, and diligence expected of a registered intermediary.
While determining the penalty, the regulator noted that OnePaper Research Analysts had previously faced action for violations of the RA Regulations. It also observed that failure to maintain communication records obscured the true extent of the misconduct and undermined investor protection.
Accordingly, SEBI imposed a penalty of ₹30 lakh on OnePaper Research Analysts.
