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Finfluencer Baap of Chart fined Rs. 17.2 crore for operating without SEBI registration

With more than 5 lakh subscribers across various social media platforms, the channel was selling “educational” courses on how to generate profits without being registered with SEBI.

On October 26, the Securities and Exchange Board of India (SEBI) published an order stating financial influencer (finfluencer) Mohammad Nasiruddin Ansari, operating with the handle “Baap of Chart” on social media, has been banned from accessing the stock market. The finfluencer has also been fined Rs 17.2 crore for “luring clients/ investors through misleading/ false information to purchase his courses/ workshops, adding them in their closed groups and inducing/ influencing them to deal in securities.” Ansari was found to be operating as an investment advisory (providing recommendations on which stock to buy/sell) without a SEBI registration. Operating without a SEBI registration is in violation of the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, Securities and Exchange Board of India Act, 1992. 

Besides Ansari, two other entities were also highlighted in the order: Golden Syndicate Venture Private Limited (GSVPL), and Rahul Rao Padmavati. Both of these entities have been also restrained from buying, selling, or dealing in securities. Further, the funds collected by Ansari and the other two entities will be impounded.

Who or what is Baap of Chart?

According to Baap of Chart’s website, it is an “auto trading software for the Indian future and options market.” The website further says that the algorithm behind the auto trading software (developed by Ansari) has a “profit accuracy of 95%.”

SEBI’s order mentions that Ansari is the sole proprietor of Baap of Chart. His social media handles have a major reach, with Baap of Chart’s YouTube channel having more than 4.43 lakh subscribers and its telegram channel having around 53,000 subscribers. SEBI noted that on Baap of Chart’s YouTube channel, Ansari had posted videos such as “Bas 5 minutes me Sureshot Profit Kro | 3 Pm Strategies” and “Power of Trading | How to make 5 to 10 Lakhs every Month” — promising quick and consistent returns through trading. 

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The case against Baap of Chart:

SEBI observed Ansari was uploading courses about the stock market onto websites and apps through the application services provided by Bunch Microtechnologies Private Limited. Bunch informed SEBI that in the courses offered on its platform, chat functionality is provided wherein tutors can connect with students in real time. Based on the messages shared on Baap of Chart’s chat groups, SEBI held that Ansari was, “providing buy/ sell/ hold recommendations in securities to his clients/investors under the garb of providing courses related to [the] securities market.”

The authority also observed that in the description of his courses, Ansari was claiming that the strategies taught in his courses would result in assured profits. During the course of its investigation, SEBI also received a complaint against Ansari which said that he had charged the complainant Rs.6000 for strategy. The complainant shared screenshots of the Whatsapp group operated by Ansari which further validated SEBI’s findings that Ansari was inducing people to invest by assuring profits. 

SEBI noted that while Baap of Chart’s website does come with a disclaimer, the assertions made in the disclaimer were ambiguous. Even though the disclaimer said that all the information on the website was for educational purposes only, Baap of Chart is being marketed towards those who would like to generate a consistent “profit.” “Such disclaimers cannot by any stretch of imagination discharge persons from the duty to comply with the law prohibiting unregistered investment advisory activity or the law prohibiting fraudulent and manipulative practices in the securities market,” SEBI said in its order.  

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Why it matters:

This is not the first time that SEBI has pulled up a finfluencer for operating an unregistered investment advisory. Earlier this year, the authority also went after PR Sundar— imposing a penalty of Rs. 6 crore and banning him from trading on the stock market. SEBI’s crackdown on both Sundar and Ansari acts as a message to all those giving out investment advice without proper registration. 

How effective is Ansari’s trading strategy? 

SEBI tested the validity of Ansari’s stock market prowess and found that he had incurred a trading loss of Rs.2.89 crores over the past 2.5 years (January 2021-July 2023). Ansari was found to have concealed his losses from the investors in his videos/ workshops/ WhatsApp groups.

In fact, SEBI’s independent research dated January 25, 2023, found that 89% of individual traders (that is, 9 out of 10 traders) incurred losses in the Futures and Options (F&O) segment of the stock market. This further highlights the fact that the 95% profit accuracy assured by Ansari was unattainable. As such, SEBI found Ansari’s investment advisory to also be in violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003

How much did Baap of Chart make from its courses?

During the course of its examination, SEBI found that the funds collected by Baap of Chart’s courses were going to the following accounts— Baap of Chart (Ansari), Rao, and GSVPL. 

                  Breakdown of the money being received by each of the account holders

Ansari also publicized two UPI IDs on his social media accounts both of which collectively received Rs. 3.42 crores since the day they were opened. 

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Further, the Ministry of Corporate Affairs carried out a search of GSVPL and found that it had the following shareholders:

  1. Mohammad Nasiruddin Ansari: 25%
  2. Rahul Rao Padamati: 24%
  3. Asif Iqbal Wani: 24%
  4. Mansha Abdullah: 15%
  5. Tabraiz Abdullah: 9%
  6. Jadav Vamshi: 2%
  7. Jyoti Mamgain: 1%

All of GSVPL’s shareholders were found to be direct or indirect recipients of fees collected or marketed/ promoted the company’s business.

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