The Securities and Exchange Board of India (SEBI), vide an ex-parte interim order (Order) dated 6 February 2025, has barred Ms Asmita Patel, a prominent financial influencers (FinFluencer) on Instagram and YouTube, along with her company, Asmita Patel Global School of Trading Private Limited (AGSTPL), and four other entities, from participating in the securities market. This order stems from complaints by 42 individuals who alleged that Ms Asmita Patel and AGSTPL misled them into investing in overpriced educational courses that falsely guaranteed financial success.

Brief Background and Facts:

1.   Business Activity: AGSTPL provided stock buy/sell recommendations through Telegram channels, Zoom meetings, and emails in addition to offering educational courses.

2.   Courses Offered: AGSTPL’s course offerings included Masters in Price Action Trading (MPAT), Let’s Make India Trade (LMIT), Options Multiplier (OM), Trend Following Income System (TFIS), The Freedom Project (TFP), OneLife, and Unleash The Trader Within (UTW).

3.   Complainant Allegations: The 42 complainants had enrolled in AGSTPL courses, including MPAT, for which they were charged up to INR 8,26,000/. As per the Order Asmita Patel allegedly used Telegram channels and Zoom meetings to disseminate trade recommendations and course details, urging complainants to liquidate existing investments and borrow funds to cover course fees. Patel, who referred to herself as the ‘She Wolf of the stock market’ and the ‘options queen,’ claimed to have mentored over hundred thousand students/investors/participants worldwide and managed assets of INR 1.4/2.83 billions using her proprietary system; however, investigations revealed that she was managing assets of only INR 152.7 millions. The Noticees received a total sum of approximately INR 1.04 billion as fees for unregistered investment advisory services.

SEBI’s Ex-Parte Decision

The Adjudicating Officer (AO) of SEBI determined that Ms Patel, along with AGSTPL and other entities, had misled investors by inducing them to exit investments like mutual funds and invest in the options market with promises of assured returns upon purchasing their courses. The Learned AO noted that the courses were not merely educational but involved providing specific stock entry/exit points and monitoring live market investments to ensure compliance with recommendations, thus falling under the purview of unregistered investment advisory services.

The Learned AO also deemed it necessary to impound INR 536.7 million to prevent its dissipation. Consequently, interim orders were issued to cease and desist unregistered investment advisory services, bar the entities from the securities market, and impound a sum of INR 536.7 million jointly and severally. Furthermore, the entities were directed to explain why the direction for disgorgement of INR 1.04 billion and other directions should not be enforced against them.

MHCO Comment

SEBI with the recent orders and crackdown on FinFluencers shows its intent to complying stricter regulations to curb misleading financial advice disseminated through social media platforms. SEBI has also removed contents of 15000 unregulated entities from social media platforms with the objective to protect general public, emphasizing the importance of accurate financial information and the potential consequences of unchecked financial advice online.

The cease and desist Order and the impounding of INR 536.7 million are warranted, given the substantial fees collected and the numerous complaints received, highlighting the regulator's need for immediate action. We believe this crackdown by SEBI on FinFluencers will hold them accountable in near future and benefit the small investors.

This update was released on 17 Feb 2025.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

Legal Update Team
MANSUKHLAL HIRALAL & COMPANY
Advocates, Solicitors and Notaries
T: +91 22 40565252
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