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SEBI Cautions Investors


SEBI has decided its now time to caution investors against "person who have been giving stock specific advice to investors and receiving consideration for the same".

SEBI has been receiving complaints against persons who have been giving stock-specific advice to investors and receiving consideration for the same. Further, it has also come to the notice of SEBI that some persons are giving investment advice through the print media or by sending bulk SMS messages even without entering into any contract or arrangement or without any consideration.

Section 12 of the SEBI Act, 1992 requires all intermediaries, including portfolio managers, associated with the securities market to obtain registration from SEBI before operating in the securities market. Under the SEBI (Portfolio Manager) Regulations, 1993, a portfolio manager is a body corporate who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client management or administration of a portfolio of securities or the funds of the client.

The code of conduct for all intermediaries including portfolio managers provides that the intermediary or any of his employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media, unless a disclosure of his long or short position in the said security has been made, while rendering such advice. The code of conduct also provides that in case an employee of the intermediary is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice.

In this context, investors are advised to be cautious and to take the following precautions before dealing in any manner with persons seeking to render such advice:-

  • where the advice is rendered or sought to be rendered by a body corporate pursuant to a contract or arrangement, to verify whether it is registered as portfolio manager under the SEBI (Portfolio Manager) Regulations, with SEBI. The list of entities which are registered as portfolio managers with SEBI can be verified from the SEBI website

  • where the advice is rendered or sought to be rendered by any person, by means of advertisements through SMSs, or the electronic or print media, whether pursuant to or in the absence of any contract or arrangement, it might be an attempt to influence market price and lure investors. Investors are therefore advised to take adequate care and carry out necessary due diligence before acting on the basis of such advice/communication.

Strangely, the phrase "through the print media or by sending bulk SMS messages" specifically excludes Television? Come on SEBI, if you have qualms about people doing this – you should be targeting the all-day-recommenders on TV channels.

Obviously they can’t tell people they don’t regulate that they shouldn’t say this or that about a stock – there is such a thing as freedom of opinion, which is probably why they don’t want to go behind media houses.

But I agree overall that anyone telling you to buy or sell a stock must necessarily disclose his and his family’s long or short positions in that stock. In fact, I’d even say, going from the Matthew Easow experience, that they should reveal when they exit the position, but that might be asking for too much.

TV presenters do try and disclose positions nowadays. Even when I mention stocks, I usually mention if I hold it or not, but if I’ve skipped any, please let me know and I’ll correct such posts. But it’s safe to assume that ANYTHING i mention, I have a vested interest in; and so does everyone who writes anything that’s stock related. (Ask yourself: if I praise a stock, why the heck wouldn’t I buy it? Isn’t that very silly?)


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