Order – Stock Market Navigator

SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER                                WTM/GA/124/ISD/01/07

ORDER UNDER SECTION 11B AND 11D OF THE SEBI ACT, 1992, AGAINST SHRI ANIRUDH SETHI AND THE BUSINESS NAME “STOCK MARKET NAVIGATOR”(SMN)

 1 Background

1.1 It has been noticed that some entities are offering investment advices/tips on purchase and sales of securities through media. Such recommendations aired through public media and their influence on the investors has been the concern of SEBI, particularly when the misleading information affects the market integrity, as unsuspecting investors fall prey to such information while making investment decisions. SEBI has earlier initiated actions against entities who attempted to mislead the general investing public by giving recommendation on securities through print and electronic media. 

1.2 In continuance of the avowed objective to safeguard market integrity, SEBI looked into the advertisements issued by one Shri Anirudh Sethi in the name of “Stock Market Navigator” in the stock quotation section of financial dailies viz. “Business Standard” and “Financial Express”. Hereinafter Shri Anirudh Sethi and the business name “Stock Market Navigator”(SMN) are collectively referred as “Shri Anirudh Sethi”. The content of the one such advertisement which appeared in “Business Standard” dated November 16, 2006  is reproduced below: 

Gear-up, Get – Set for a Superior Life-style

Pl Note: No Trials, No Monthly/Qtrly break-ups

[email protected]” 

1.3 In the advertisement, Shri Anirudh Sethi has solicited business from prospective investors to subscribe to “Stock Market Navigator” on payment of Rs. 50000 p.a. per investor for receiving recommendation to buy or sell the shares of listed companies.  It is also noted that Shri Anirudh Sethi gives recommendations on one of the website viz. valuenotes.com on a regular basis with an advice to contact him at the following email addresses:

http://www.valuenotes.com/tw_dailies/[email protected] http://www.valuenotes.com/tw_dailies/[email protected] [email protected]

1.4 It is also found that a website viz. www.sensexandnifty.com has been hosted to spread awareness about “Stock Market Navigator”. As per the said website, “Stock Market Navigator” is headed by Chief Analyst & CEO, Shri Anirudh Sethi located at Baroda, Gujarat. It is stated that “Stock Market Navigator” is a team of professionals and technical analysts having an experience of more than 15 years in the Indian Stock Market and Shri Anirudh Sethi is a professional analyst having a rich experience of around 15 years successfully predicting the movement of Indian Stock Market. The vision of “Stock Market Navigator” is reported to be as mentioned below: 

“At a small price of nominal fees charged by us, it is our endeavor to ensure that targets of all clients should be met. Yes, you fix any kind of target from 5 digit figure to 8 digit figure and it will be met. Tell us your capacity and financial strength we will maximize the returns for you. We have a long lasted vision of seeing all people associated with us to successfully fulfill the stock market their dreams of life.”

The address of “Stock Market Navigator” (Shri Anirudh Sethi) as given in the website www.indianyellowpages.com is B-228, Anand Baugh Society, Makarpura Road, Behind Suseen, Baroda, Gujarat.   

2.   Acting as a Portfolio Manager without SEBI Registration

2.1 In the advertisement, Shri Anirudh Sethi is offering to provide recommendations/tips on shares of listed companies to traders/investors on payment of certain amount as a fee. Hence, a contractual obligation arises between Shri Anirudh Sethi and investors/ traders, out of such kind of fee based service of providing stock specific recommendations. This act of Shri Anirudh Sethi giving stock specific recommendations to the traders/investors on a contractual basis falls within definition of activities of Portfolio manager as defined in Regulations 2(e) of SEBI (Portfolio Managers) Regulations, 1993 which is given as under: 

“Portfolio manager means any person who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise) the management or administration of a portfolio of securities or the funds of the clients, as the case may be”

Therefore, it prima-facie appears that Shri Anirudh Sethi acted as a “Portfolio Manager” without obtaining registration from SEBI to act as a “Portfolio Manager” as required under Section 12 of SEBI Act, 1992 and Regulation 3 of the SEBI (Portfolio Managers) Regulations, 1993. The relevant provisions of the said Section and Regulations are reproduced below:

3.   Scrip Specific Information Announced by Shri Anirudh Sethi

 3.1 It was noticed that the advertisement issued by Shri Anirudh Sethi also contains a stock specific recommendation with an assurance of price rise on account of certain company specific information which is not made public. SEBI had advised the exchanges to verify with the company with regard to the company specific news made by Shri Anirudh Sethi for the period from October 16, 2006 to November 16, 2006. SEBI had conducted a scrutiny of data received from the exchanges and analysis of post-recommendation impact on the price and volume of the scrip. The findings of the same as given below:

3.2 The details of the scrip specific information  given by Shri Anirudh Sethi on the print as well as on the electronic media and the response of the companies, for the selected days, is given below:

Table A: Details of the advertisements by Shri Anirudh Sethi 

3.3 It is seen from the above table that Shri Anirudh Sethi has made price sensitive announcement viz. future plans of the companies, bonus etc which on verification by the exchanges with the concerned company were either found to be denied by the said company or the company has not made any announcement to that effect to the exchange. 

3.4 In the advertisement, Shri Anirudh Sethi has issued a disclaimer/disclosure in fine print that “the objective of publication is to promote the Science & Art of Technical Analysis to forecast price movements and this information should not be construed as an offer to buy or sell securities of any kind”. However, it was observed that most of the recommendations made by him contained an assurance of price rise along with the company specific news relating to company’s business, its future prospects, bonus etc, which were either denied by the said company or in respect of which the company has not made any such announcement to that effect to the exchange. 

4.  Impact on Price and Volume of the Shares of the Company

4.1 Analysis of trading in the shares of companies, for which Shri Anirudh Sethi had given advertisements, was carried out to ascertain its impact on the price and volume of concerned scrips. The details of the analysis are given in table below: 

 Table A: Price Impact and Volume Impact Analysis

4.2 It is seen from the above table that shares prices of the above companies have gone up on the day of recommendation given by Shri Anirudh Sethi in the media. However, next day, the share prices of 13 companies, out of 16 companies had fallen next day. Further, it is also observed from the above table that the volumes traded on the day on which recommendation appeared in the media had increased substantially as compared to previous day.  It is pertinent to mention that during this period, the companies either denied the existence of such information or had not sent any notice to the stock exchange as statutorily required under the Listing Agreement. 

4.3 This suggests that company specific news was planted by Shri Anirudh Sethi in the media which had an impact on the price and trading volume of the shares of the concerned company, which were not substantiated by the companies, except in two cases out of sixteen cases. It appears that the major objective of Shri Anirudh Sethi for issuing such advertisement is to attract the investors to subscribe to his services provided through emails and/or SMS messages on making certain payment to him. 

5.  Violation of SEBI Regulations 

5.1 From the above, it is apparent that Shri Anirudh Sethi is inducing the investors to deal in the shares of a particular company by disseminating company specific information, through advertisement on print and electronic media, which had not originated from the company and which had not been confirmed by the company. This act of Shri Anirudh Sethi is in violation of Regulation 4(1) read with Regulation 2(1)(c)(5) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 [SEBI (FUTP) Regulations]. The relevant provisions of the said regulations are reproduced below:

5.2 The above act of Shri Anirudh Sethi is also in violation of Regulations 4(2)(k) and 4(2)(r) of SEBI (FUTP) Regulations. The relevant provisions of the said Regulations are reproduced below:

5.3 The aforesaid provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 are statutory provisions aimed at ensuring market integrity and protecting the lay investors. 

6 Conclusion

6.1 Shri Anirudh Sethi, disseminated company specific information through advertisement on print and electronic media which has been denied by the company and in respect of which the company had not sent any notice to the Stock Exchanges as statutorily required under Listing Agreement. This is a clear case of an attempt to mislead the investors by indulging in activities prejudicial to the price discovery mechanism of the Stock Exchange. Hence, Shri Anirudh Sethi has violated the above said provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. Further, it prima-facie appears that Shri Anirudh Sethi acted as a “Portfolio Manager” without obtaining registration from SEBI to act as a “Portfolio Manager” as required under Section 12 of SEBI Act, 1992 and Regulation 3 of the SEBI (Portfolio Managers) Regulations, 1993. 

6.2 Having regard to the foregoing, it is apprehended that lay investors could be further misled on account of such continuous dissemination of untrue information. As a regulator, it is SEBI’s duty to take immediate steps to prevent such persons from further misleading investors and impairing the integrity of the market. Accordingly, in this case I feel that immediate action is called for in the interest of the investing public.

7 Order

7.1 Therefore, in exercise of the powers delegated to me by the SEBI Board in terms of Section 19 of the SEBI Act, 1992 read with Section 11B and 11D, I hereby, by way of, ex-parte order, direct Shri Anirudh Sethi and the business name “Stock Market Navigator”(SMN) to cease and desist from giving investment advice to clients including any recommendations containing company specific news which amounts to violation of Regulation 4(1) read with Regulation 2(1)(c)(5) and Regulation 4(2)(k) and 4(2)(r) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. 

7.2 Further, Shri Anirudh Sethi and the business name “Stock Market Navigator”(SMN) are directed to cease and desist from acting as an unregistered portfolio manager until they are registered with the Board in terms of Section 12 of SEBI Act read with Regulation 3 of SEBI (Portfolio Managers) Regulations, 1993. 

7.3 The above order is without prejudice to the any other action that may be initiated against the said violations.

7.4 I also take this opportunity to caution investors to take informed investment decisions without being influenced by such recommendations given in the public media.

7.5 The print and electronic media has a wide reach; therefore, they have a responsibility cast on them for exercising due care and diligence to ensure that such persons do not misuse the power and credibility of the media for illegal pecuniary gains. 

7.6 The above order shall take effect immediately. However, the entities/persons against whom this order is issued may file their objections, if any, to this order within 15 days from the date of this order at the Securities and Exchange Board of India, SEBI Bhavan, C4-A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai-400 051.