Sebi orders impounding Rs 5 cr in SMS-based investment scam

Markets watchdog Sebi today ordered impounding unlawful gains of over Rs 5 crore from two individuals and their associated firms after finding them guilty of providing unregistered investment advisory services through mobile SMSs and WhatsApp messages.
A probe conducted by Sebi found that 'trading tips' were being offered to investors through mobile SMSs and WhatsApp messages by two individuals --Mansoor Rafiq Khanda and Firoz Rafiq Khanda -- while promising guaranteed returns of as much as 200 per cent.
They were providing such investment advisory services without obtaining registration from Securities and Exchange Board of India (Sebi).
In an order passed today, Sebi said these individuals through their proprietorship concerns have therefore allegedly engaged in a scheme or artifice to defraud the investors in contravention of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations.

Accordingly, Sebi has ordered two individuals as well as their associated companies to impound the unlawful gains of a sum of Rs 5,04,01,896 (including interest) jointly and severally from them.
The regulator, in an interim order in June 2014, had asked these individuals as well as their associated companies to cease and desist from acting as an investment advisors and not to solicit or undertake such activities or any other unregistered activity in the securities market.

They were also asked to immediately withdraw and remove all advertisements, representations, literatures, brochures, materials, publications, documents, websites, etc in relation to their investment advisory or any unregistered activity in the securities market.

Sebi had begun its probe after receipt of complaints that certain entities were offering trading tips through Short Message Services (SMSs) and WhatsApp sent from five distinct mobile numbers, as also some websites.
In these messages, the investors were being promised 200 per cent assured returns on deposit payments of Rs 25,000, along with promise for trading tips.
The messages also promised monthly gains of Rs 25-50 lakh.
Based on the complaint, Sebi undertook a preliminary examination by making telephone calls to the concerned mobile numbers and were directed to make necessary payments through a website.
Sebi had said that the modus operandi involved sending SMSs to investors with inducing claims and citing references to the website addresses, inviting prospective investors to enroll with them for their investment advisory services for a registration fee; followed by the registered clients being provided trading tips on "consideration/profit sharing" basis.