Description

SEBI adjudication order against research analyst Abhishek Kumar Singh for promising assured returns, fraudulent trade practices, and violations of Research Analyst Regulations during inspection period February-November 2024.

Summary

SEBI has issued Adjudication Order No. Order/AK/DS/2025-26/31837 against Abhishek Kumar Singh, proprietor of Supreme Investrade and Research Services (SEBI Registration No. INH000008747), following a thematic inspection for the period February 1, 2024 to November 30, 2024. The inspection focused on whether the research analyst was promising assured returns to clients. Based on inspection findings and 44 SCORES complaints from 18 unique complainants, SEBI observed prima facie violations of SEBI Act 1992, PFUTP Regulations 2003, and Research Analysts Regulations 2014.

Key Points

  • Adjudication proceedings initiated under Section 15-I of SEBI Act and Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995
  • Inspection period: February 1, 2024 to November 30, 2024
  • 44 SCORES complaints received from 18 unique complainants during inspection period
  • Research analyst provided assurance of 15-20% daily gains to clients
  • Solicited 50-70% profit sharing from clients as fees for research services
  • Induced clients to increase position sizes and average out existing positions with same-day recovery assurances
  • Posted misleading profit screenshots without risk disclosures to induce clients
  • Personally provided recommendations directly to clients
  • Show Cause Notice issued on July 31, 2025 (SCN No. SEBI/HO/EAD/EAD1/P/OW/2025/20571/1)
  • Adjudicating Officer appointed on June 30, 2025

Regulatory Changes

No new regulatory changes introduced. This is an enforcement action for violations of existing regulations:

  • SEBI Act, 1992
  • SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003
  • SEBI (Research Analysts) Regulations, 2014

Compliance Requirements

For Research Analysts:

  • Must not promise or assure guaranteed returns to clients
  • Must not solicit excessive profit-sharing arrangements (50-70% of client profits)
  • Must not induce clients with misleading profit representations without adequate risk disclosures
  • Must not induce position sizing increases with assurances of recovery
  • Must comply with PFUTP Regulations and Research Analyst Regulations at all times
  • Must maintain proper client communication standards as per RA Regulations

General Obligations:

  • Adhere to fair trade practices in securities market
  • Maintain transparency in fee structures
  • Provide balanced risk-return disclosures in all client communications

Important Dates

  • February 1, 2024 to November 30, 2024: Inspection period
  • April 9, 2025: Inspection findings communicated to Noticee
  • April 17, 2025: Noticee’s reply to inspection findings
  • June 4, 2025: SEBI approved initiation of adjudication proceedings
  • June 30, 2025: Adjudicating Officer appointed
  • July 31, 2025: Show Cause Notice issued

Impact Assessment

Market Impact: Low - This enforcement action targets a single research analyst and does not affect broader market operations or trading activities.

Investor Protection Impact: High - The order addresses serious investor protection concerns including assured return promises, excessive fee structures, and misleading representations that could cause significant client losses.

Regulatory Impact: Medium - Reinforces SEBI’s commitment to monitoring research analyst conduct and taking action against fraudulent practices. Serves as deterrent and precedent for other research analysts engaged in similar practices.

Industry Impact: Medium - Research analysts and investment advisory firms should review their client communication practices, fee structures, and ensure compliance with prohibition against assured returns and misleading representations.

Specific Violations Identified:

  1. Promising assured/guaranteed returns (15-20% daily gains)
  2. Excessive profit-sharing fee arrangements (50-70% of client profits)
  3. Inducing position increases without proper risk disclosure
  4. Misleading marketing through selective profit screenshots
  5. Potential violations of client servicing standards under RA Regulations

Impact Justification

Enforcement action against individual research analyst for regulatory violations. High severity due to fraudulent practices but low market impact as it affects one registered entity. Important for research analyst compliance awareness.