SEBI registered RA are meant to provide your advisory services and yes they charge you fees for the same. But they cannot just give you some random tips or ask you to increase your position sizing.
In case they do, then it is the clear sign of some kind of scam or fraud that you can directly report to SEBI.
But again, there is hardly anyone who is aware of what an RA can say and what cannot which eventually leads to loss of retail traders.
Recently we came across the case where Sharukh (name changed) got a call from a person who was SEBI registered who convinced him to use his call tips and to work on profit sharing model that wiped off Sharukh’s account in one day.
Here is what actually happened.
ADB: Hello Sharukh, please share your concern.
Sharukh: Sir, one registered RA gave me wrong tips, misguided me and blow off my account worth ₹5 lakh in a day.
ADB: Sorry to hear that. Please tell what actually happened?
Sharukh: It was Sunday evening, I received a call from unknown number. It was a call from SEBI registered RA who told me about his sure shot call tips & recommendations.
I am a trader myself and refused to take his tips. Also, due to losses I was not trading at that time.
But on Monday morning he called me again and asked my balance in the trading account. It was around ₹5 lakh. He then convinced me to trade according to his tips.
ADB: Well, a SEBI registered RA is not allowed to do so. Did you use his tips?
Sharukh: Yes, but he asked me to take maximum lots however I preferred to trade in 1 lot only.
ADB: How much profit sharing did he ask for?
Sharukh: He asked for 30% profit sharing.
ADB: Okay, so did you earn profit?
Sharukh: Yes, first day I bought 1 lot as per his call tip and earned a profit according to which his share was ₹127. When I asked him to share his bank details, he said that the value is too less.
Next day, he called me and pressurised me to take maximum position. I don’t know how I got convinced.
I used my entire capital but as soon as the market turns against me I thought to square off.
When I called him he asked me to wait then at around 3 PM he asked me to square off my position but by then I lost ₹4.91 lakh.
ADB: Did he provide you stop loss?
Sharukh: No, he didn’t, even though I asked him but he said that market is in uptrend and there is no need of stop loss.
ADB: And did he provide you with the reason of why he provided you that tip?
Sharukh: Yes, he said that HDFC Bank is trading at ‘All time High’.
ADB: Did you try to contact him?
Sharukh: Yes, I called him multiple times and then he suggested me to open a Forex trading account where he would help me in recovering my losses.
ADB: What! forex trading and a SEBI registered RA asked you for that?
Sharukh: Yes sir. He did, however I didn’t fall in his trap. Also, I was left with no capital to trade or invest.
ADB: Even though you had, Forex trading is illegal in India and that’s really shocking that a SEBI registered RA is suggesting you to trade on illegal platform.
Anyway do you have any proofs of all these conversation?
Sharukh: Yes sir, I have all the screen-recordings & WhatsApp messages.
ADB: Great! you can document all these proofs and can file a complaint against RIA on SEBI Scores portal. Since he is SEBI registered RA you can claim refund of losses and any fees that you had paid.
So a trader himself who had a little idea of market got scammed by SEBI registered RA and the reason behind that is the lack of awareness and knowledge of regulations of SEBI.
Sharukh is not alone, there would be many more traders with big dreams in their eyes who got scammed by such RA and there are RA who misuse their rights for their own interest & benefits.
It is therefore important to be responsible towards your money and to follow your instincts. So stay safe and protect yourself from such scams.
