Market regulator Securities and Exchange Board of India (SEBI) has asked Kabir Financial Services Pvt Ltd (KFSPL) and its directors, Sayyed Shujauddin and Farhat Perween to deposit in an escrow account Rs12.84 crore collected in just two years from investors via its unregistered investment advisory services business.
In an order, Ananth Narayan G, whole-time member (WTM) of SEBI, says, " The conduct of KFSPL, Mr Shujauddin and Mr Perween as discussed in the previous paragraphs of this order suggest that they have the propensity to ignore the law. The suspicions already explained elsewhere in this order, regarding their possible involvement in executing trades on behalf of investors in violation of securities laws, also exacerbate the need to take urgent preventive directions so that unlawful gains made by them are not defalcated. Considering the risk that KFSPL, Mr Shujauddin and Mr Perween may divert the alleged unlawful gains before examination or investigation is concluded, and directions for disgorgement and refund, if any, are passed, non-interference at this stage would therefore result in irreparable injury to interests of the securities market and the investors."
"From the material available on record, I note that the examination in the matter was initiated on the basis of a complaint. I also note that an aggregate amount of Rs12.84 crore has been collected by the noticee in the bank accounts by providing unregistered investment advisory services, which needs to be refunded to the investors or clients," the WTM says.
SEBI received a complaint via email stating that Mr Shujauddin is running many private telegram channels, giving fake and fraudulent tips, and duping thousands of Indian citizens. He has duped thousands of members for crores of rupees and fooled innocent citizens into managing other people's accounts and providing stock market tips, the complaint alleged.
During the investigation, SEBI found that Telegram channels like kabir_banknifty, kabir_banknifty options, masterkabir_banknifty, nifty_banknifty_options_Kabir and kabir_nifty_banknifty were run by Mr Shujauddin and KFSPL from where he advertised and cheated innocent people by taking huge membership fees for providing stock market tips. Across all five Telegram channels, they have reached around 1,40,000 subscribers.
Further, KFSPL and its directors were not registered with SEBI as investment advisers till February 2023, and yet represented themselves as legitimate investment advisers to investors.
They assured guaranteed profits to many subscribers during their chat on Telegram. SEBI says, it is nothing more than a ploy by them to lure and induce investors to deal in securities by availing unregistered investment advisory services. "These activities are prima facie fraudulent and are covered under the definition of 'fraud' under regulation 2(1) of the PFUTP Regulations."
Kabir Financial Services and its directors contended that they were engaged in providing and disseminating publicly available information concerning various securities and the securities market to the customers.
SEBI found that the entity operated without investment adviser registration and misrepresented itself. Further perusal of the bank accounts and transactions showed that Kabir Financial Services had collected Rs12.84 crore as the fee within two years for investment advisory services.
The WTM says, "The proceeds in the bank accounts of KFSPL, Mr Shujauddin and Mr Perween, to the extent of illegal gains, shall be impounded, jointly and severally. Further, they are directed to open an escrow account with a scheduled commercial bank and deposit the impounded amount mentioned therein within 15 days from the date of service of this order. The escrow account shall be an interest-bearing escrow account and a lien shall be created in favour of SEBI. Further, the monies kept therein shall not be released without permission from SEBI."
The market regulator also restrained KFSPL, Mr Shujauddin and Mr Perween from markets till further directions.