As per the terms of a settlement order passed by SEBI on 6 May 2022, SEBI-registered research analysts cannot offer model portfolios or provide advisory services. In this SEBI put a settlement amount 28.6 lakh on Amit Jeswani, a SEBI registered research analyst and owner of a firm called Stallion Asset. The settlement order is likely to affect Smallcase, a platform that offers investors curated portfolios created by research analysts as well as investment advisors. Windmill Capital, a research analyst firm affiliated with Smallcase, which provides such portfolios, also holds a research analyst license.
As per the settlement order, SEBI A show cause notice was issued to Jeswani on 4 May 2021. In this, the regulator said that “it is observed that being a research analyst, the applicant was selling model portfolio products to his/her clients/potential clients which is against the defined responsibility. mentioned in the professional standards. The show cause notice further stated that, “The applicant was not registered as an investment advisor. SEBIHowever, from the call data records of the applicant in which calls were made to the client by the employees of the applicant, it was observed that it was projected as an entity providing advisory services to the clients.” After the show cause notice, Jeswani without accepting or denying the findings of fact or the conclusion of law applied for a settlement on October 27. The regulator then passed a settlement order for the amount of 28.6 lakh and also barred Jeswani from obtaining any other registration under SEBI for a period of 3 years.
Sandeep Parekh, Managing Partner, Finsec Law Advisors strongly opposed the SEBI order. In a series of tweets, Parekh said that offering model portfolios is within the legal definition of what a research analyst can do. Furthermore, there is no evidence to show that Jeswani has been dishonest or sloppy and non-hardworking. “The only problem it appears to be is that it has said to provide ‘advisory services’ on call with customers. Which doesn’t appear to be an ethical violation or regulatory violation. Yes, it is labeling the service incorrectly.” Has not violated any law. Second, more importantly, it will introduce coolness to people providing honest regulated services. It is also worrying that the regulator has chosen to go after such a case while literally tens of thousands of people provide unregulated ‘stock tips’. Social media which is dishonest,” he said.