madhabi puri buch: Sebi chief decodes ‘sayanapanti’ of algo sellers, finfluencers, Indore-type advisors

To lure gullible retail traders and investors, a number of not-so-credible and even fake advisors, algo sellers, and finfluencers are cleverly circumventing the law to run unauthorised schemes in the stock market. Sebi chairperson Madhabi Puri Buch on Wednesday turned the spotlight on such malpractices by saying that when the regulator drafts regulations, they also have to worry about ‘sayanapanti’ or tricks by unscrupulous players.

“A person will say I do not give trading calls, his wife does. Within Sebi, we call this ‘sayanapanti’,” Buch said at the RIA conference in Mumbai.

She gave the example of algo players who do some backtesting of data and then claim that they deliver 300% and influencers whose videos claim that one of their students made Rs 15 crore in a year.

A number of finfluencers also run illegal PMS schemes and use their social media following to attract such investments. Some investors even end up giving their user ID and password to such illegal PMS managers executing trades on their behalf.

As a regulator, Buch said, we cannot afford to have one lakh of Indore-type investment advisors. “I have personally gone through and seen people being driven to suicide because of the bad things that happen in the market.”

Citing that a large number of 35% of investment advisors are still not registered with the regulator, she said. “We need the good guys to come and tell us what are the malpractices in the market and help us craft solutions so that the good guys win. We want a million investment advisors. It is clearly our failure that we have such a small set of investment advisors,” Buch said.

Earlier in August, the watchdog issued a consultation paper to limit the association of registered intermediaries or regulated entities with unregistered entities.Under the proposed rules, neither will registered intermediaries or regulated entities directly or indirectly have any association, whether monetary or non-monetary, with such finfluencers, nor will stock exchanges or AMFI share any confidential client information with any unregistered entities.

The regulator also wants to form a supervisory body of IAs/RAs for fee collection by Sebi-registered investment advisers and research analysts (IAs and RAs) as well as a performance validation agency (PVA) that will independently verify claims made by IAs and RAs.

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