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Indian-origin brothers charged with deceiving investors in supposedly unbiased reports

Press Trust of India  |  New York 

Two Indian-origin brothers have been charged by the US federal regulator for deceiving investors by purporting to provide unbiased research reports on certain publicly-traded small and microcap companies.

Ajay Tandon, 41, and Amit Tandon, 47, of and stock research firm co-founded by them were charged by the with defrauding investors by issuing reports purportedly based on "unbiased" and "not paid for" research when in reality they received thousands of dollars from issuers as a condition to providing each report.

Ajay is the of and has experience in the securities industry. Amit is the of Research at as well as an and a member of the Bar.

According to the SEC's complaint, and the Tandon brothers camouflaged the payments by inviting companies to make a "presentation" at an investor conference in order to receive a research report for free.

and the Tandons allegedly collected up to several thousand dollars in conference presentation fees per company, and the issuers regularly had input into the substance of the supposedly unbiased research reports, even including the price targets at times, according to the complaint.

The SEC alleges that the Tandons often instructed analysts to use different, higher price targets for covered issuers than those yielded through purported quantitative analysis, and the price targets contained in SeeThru's reports were typically more than 300 per cent above the current trading price of the stock.

The SEC further alleges that Ajay frequently traded in the same stocks that SeeThru was evaluating despite stating in published interviews and elsewhere that neither the firm nor its principals traded in securities for which they published research.

It alleges that Tandons also engaged in scalping, which is a form of that occurs when a perpetrator makes a stock recommendation to investors and contemporaneously trades against that very recommendation in the open market without adequate disclosure.

"There is a clear line between paid advertising and unbiased research coverage, and we allege that SeeThru and its co-founders crossed it to deceive investors and make money," of the SEC's Atlanta Regional Office said.

"According to our complaint, even scalped multiple issuers, further revealing the biased nature of SeeThru's research reports."

The complaint, which was filed in federal court in Manhattan, charges Ajay and SeeThru with violating the antifraud provisions of the federal securities laws, and charges Ajay and Amit with aiding and abetting certain violations by SeeThru.

The SEC seeks permanent injunctions, a conduct-based injunction that would bar the Tandons and SeeThru from promoting the issuer of any security, and disgorgement of ill-gotten gains plus interest, penalties, officer-and-bars, and penny stock bars.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, November 09 2018. 10:25 IST