Market regulator Securities and Exchange Board of India (SEBI) has restrained Stark Investments and four associated entities from buying, selling or dealing in securities, or associating with the securities market in any manner, directly or indirectly, until further orders for allegedly providing unregistered investment advisory (UIA) and portfolio management services (PMS).
The other entities covered by the order are: Surabhi Chauhan, Zahin Ismail Jessani, Starkblue Ventures LLP and Shakuntala Davendra Singh. SEBI initiated its investigation after receiving 16 complaints alleging that the entities were offering investment advisory and portfolio management services without the mandatory registration.
According to SEBI’s order, the preliminary investigation found that the entities solicited investors by executing investment advisory agreements with Stark Investments while simultaneously offering portfolio management services (PMS). Investors were allegedly lured with claims of proprietary quantitative models, algorithm-based trading systems, stringent risk-management practices, downside protection and returns that outperformed benchmark indices such as the Nifty 50. Investment recommendations were reportedly shared through WhatsApp messages, Excel sheets and periodic performance reports.
SEBI also found that the entities promoted an investment strategy under the name SQAR (Stark Quantitative Absolute Return) through Starkblue Ventures LLP. Investors were inducted as partners in the LLP, their funds were pooled into a common corpus and managed under a common investment strategy, while key investment decisions remained under the control of Surabhi Chauhan and Zahin Jessani.
The regulator observed that clients were persuaded to open trading accounts with SEBI-registered brokers such as IIFL and Zerodha. They were then allegedly asked to share sensitive information, including trading account login credentials, passwords, email access and one-time passwords (OTPs), enabling the entities to operate their accounts.
SEBI's examination further revealed that Stark Investments marketed itself as an investment advisory and management company offering customised investment planning, portfolio management, tax planning and advisory services. Marketing material claimed the firm had experienced professionals, proprietary stock-picking models, active risk management and a history of delivering superior returns relative to benchmark indices.
The investigation also found multiple instances in which Surabhi Chauhan and Zahin Jessani allegedly provided specific buy and sell recommendations for listed securities via WhatsApp chats and charged advisory fees to clients. SEBI said the communications demonstrated that investment advice was being provided regularly without the requisite registration.
Pending further investigation, SEBI has directed that the five entities shall remain restrained from buying, selling, or dealing in securities, or from accessing the securities market in any manner, until further orders.
The regulator has also frozen their bank and demat accounts, directing that no debits be permitted without SEBI's prior approval, although credits to these accounts will continue to be allowed. Existing derivative positions, if any, may be squared off within three months or on contract expiry, whichever is earlier.
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