NEW DELHI: Sebi has banned two individuals from the securities market for three years for falsely promising unrealistic assured investment returns and "fraudulently extracting money" from investors in the name of subscription fee.
The action has come in a matter of unregistered investment advisory activity wherein three individuals -- Rishabh Jain, Ubaidur Rahman and G Kadar Hussain (notices) -- had violated Sebi norms.
Since Ubaidur Rahman has passed away, Sebi has directed his legal representative(s) and the two other individuals to refund money to investors.
Apart from the three-year ban, the regulator has also restrained Rishabh Jain and G Kadar Hussain from associating with any listed companies, any company which intends to raise money from the public, or any Sebi-registered intermediary in the capacity of director/ promoter/ senior management.
The latter part of the ruling would be in place for three years "from the date of this order or till the expiry of three years from the date of completion of refunds to investors, whichever is later," Securities and Exchange Board of India (Sebi) said in an order dated July 21.
Sebi had received several complaints against some websites that were allegedly offering unregistered investment advisory services.
It was prima facie found that the individuals had created unregistered investment advisory websites and lured investors by promising assured monthly income with unbelievable returns on buying and selling of securities based on the tips provided by them.
Following subscription, they either gave stock tips for a few days to the subscribers and then stopped entertaining their calls, or avoided the calls of the subscribers entirely without giving any stock tips.
According to the 48-page order, the noticees carried out unregistered investment advisory activities through various websites, and knowingly misled and deceived investors by misrepresenting that the websites floated by them were "approved" by the regulator.
They were also found to have misled investors by fraudulently using the registered certificate of another Sebi-registered investment advisor and by disseminating false information on their websites.
As per the regulator, money in excess of Rs 10 crore has been collected by the noticees through subscription fee for unregistered investment advisory activity on the websites.
However, it is seen from the bank account statements of Ubaidur Rahman held with HDFC bank and SBI, respectively, that he had also received subscriptions directly into his bank accounts apart from the payment gateway provided on the websites, Sebi said.
Therefore, total money collected in the pretext of providing investment advisory could be much higher, it added.
Through certain websites, Sebi said "the notices have falsely promised unrealistic assured returns on investments to investors and have fraudulently extracted money from the investors in the name of subscription fee by misrepresenting themselves as registered investment advisors, which is evident from the various complaints received against the websites run by the notices".
In addition, the regulator has directed Rishabh Jain and G Kadar Hussain not to undertake investment advisory services or any activity in the securities market without obtaining a certificate of registration from Sebi after the expiry of the period of debarment.