SEBI-registered RAs 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 a 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 they cannot, which eventually leads to the loss of retail traders.
Recently, we came across a 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 profit-sharing model that wiped off Sharukh’s account in one day.
Here is what happened.
ADB: Hello Sharukh, please share your concern.
Sharukh: Sir, one registered RA gave me the wrong tips, misguided me, and blew off my account worth ₹5 lakh in a day.
ADB: Sorry to hear that. Please tell me what actually happened.
Sharukh: It was Sunday evening, and I received a call from an unknown number. It was a call from SEBI 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 about 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 a 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 low.
The next day, he called me and pressured me to take a maximum position. I don’t know how I got convinced.
I used my entire capital, but as soon as the market turned 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 with a stop loss?
Sharukh: No, he didn’t, even though I asked him but he said that the market is in an uptrend and there is no need to 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 an ‘all-time high’.
ADB: Did you try to contact him?
Sharukh: Yes, I called him multiple times, and then he suggested opening a Forex trading account where he would help me recover 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 into 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 trade on one of the banned forex trading apps in India.
Anyway, do you have any proof of all these conversations?
Sharukh: Yes, sir, I have all the screen recordings & WhatsApp messages.
ADB: Great! You can document all these proofs and share them with us. We would help you in filing a complaint on the right portal for the fraud & forex scam recovery.
So, a trader himself who had little idea of the market got scammed by SEBI SEBI-registered RA, and the reason behind that is the lack of awareness and knowledge of the 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 for your money and to follow your instincts. So, stay safe and protect yourself from such scams.
