Arvind Gilda, a retail trader with big hopes of making money in the stock market, decided to get some expert help and searched for a Research Analyst.
Finally, his search ended when he found a SEBI-registered Research Analyst (RA), Purooskhan on the website www.optionresearch.in.
He found his services promising and paid ₹50,000/- fees to begin his journey of stock trading. But soon things turned south when instead of making a profit, Arvind ended up losing ₹4 lakh.
He made multiple attempts to reach out to the advisor and on getting no response he knocked on the door of SEBI by filing a complaint against Purooskhan in SCORES.
Around the same time, SEBI received another complaint against Purooskhan from Gulshan Kumar who bought his ₹5,000 plan and faced similar consequences.
This convinced SEBI to look into this matter in depth. On investigating the matter what SEBI uncovered left them in shock.
What did SEBI Investigate?
To provide justice to retail traders, SEBI sent an email to Purooskhan but in response to that mail, they got to know that Purooskhan didn’t run any company or a website with the name Options Research Consultancy.
Instead, Purooskhan mentioned three names G. Faheeth Ali, Ms. Fathima M, and M.S. Ahammed Ali who were illegally using his registration number and name to provide advisory services.
SEBI then dug into the matter and found that an illegal investment advisory business was being run by these three partners in which they were providing tips & recommendations to multiple clients on WhatsApp.
On further investigation, SEBI found that they were offering multiple plans ranging from ₹5,000 – ₹1,50,000, details of which were available on the website.
They then checked the bank details provided by one of the complainants Arvind. It was the detail of the company’s current account in SBI in which they had collected ₹28,74,589/- from multiple clients.
But Gulshan, another complainant shared one Google Pay number from which SEBI found that few transactions were done in Kotak Bank which was in the name of Mohamed Fakrudeen.
This brought the fourth person in the picture who was a brother of one of the partners.
On checking the details of this bank account SEBI found the fees amount of ₹1,64,999 which made the total scam value equal to ₹30,39,588.
With this SEBI concluded that they had violated PFUTP and other regulations of SEBI and hence proceeded with the next step of sending a notice to all 4 violators.
What were the Violators’ Responses?
The three partners disregard all the allegations made against them.
Instead, Ms. Fathima responded and stated that they were running a business lawfully under the partnership with Mr. Purooshkhan who was the only one engaged in providing advisory services to clients.
Hence they had not misused his registration number.
Another violator came up with a response where he mentioned that Purooskhan was associated with the company and working as a compliance officer.
What Was Purooskhan’s Response?
SEBI on getting the above response from violators, interrogated Purooskhan to which he said that he was not aware that his registration number and name were misused by them to provide illegal advisory services.
Also, he mentioned that Faheeth Ali had approached him once with an offer to become a compliance officer which he rejected. To support the same, he shared WhatsApp chat screenshots.
In the screenshot, SEBI discovered a chat between Purooskhan and Faheeth Ali discussing Arvind Gilda’s complaint. Purooskhan had asked Faheeth Ali to look into it and even shared an email screenshot he had received from SCORES.
This indicated that Purooskhan was not completely unaware of these illegal advisory services and might be connected with them directly or indirectly.
What Action Did SEBI Take?
SEBI gave enough time to violators to prove the points they mentioned. But no supported document or any proof were submitted by either of them
Thus based on investigation SEBI found out that three partners G. Faheeth Ali, Ms. Fathima M, M.S. Ahmmed Ali along Mohammed Fakrudeen had violated SEBI IA and PFUTP regulations.
In their legal activities, they had collected fees from around 40 clients which led to the total fraud of ₹30,39,588.
To provide justice to clients, SEBI collected data on those 40 clients along with the amount of the fees they deposited to refund the amount of the respective fee.
Yes, only the fees amount and not losses.
But why?
Because the complaint was raised against a registered RA, but the services were actually provided by unregistered, illegal advisors.
SEBI thus imposed a penalty of ₹6,00,000 each on Option Research Consultancy and the three violators, along with a ₹1,00,000 penalty on the associated person, Mohamed Fakrudeen.
Did SEBI Decision Provide Justice to Complainant & Other Retail Traders?
Although SEBI charged a decent penalty on the violators in one of their findings they found the involvement of Purooskhan in the fraud as well.
Why no action had been taken against him?
Further, SEBI checked only two bank accounts, the details of which were submitted by 2 complainants, respectively.
Why SEBI didn’t consider checking the personal bank details of all the violators involved in the scam?
The scam might be much bigger than it appears. Some important details were not taken into account, considering those could have provided fair justice to retail traders like Arvind Gilda who also lost ₹4,00,000 in trading, all because he trusted someone pretending to be a legit advisor.
What was his mistake in all this?
He was the one who followed the regulations and did not opt for any unregulated services, so why did he and other retail traders have to suffer in the end?
Did the decision of SEBI provide any justice to retail traders?
Would SEBI ever be able to answer these questions of retail traders who almost every day got scammed by one or the other authorized members of the stock market?
