By Asha Menon
A financial influencer or finfluencer’s tweets, which imply assured returns, have started a Twitter war. Furu-busters (short for ‘fake guru busters’) who look to protect retail investors’ interests, have been calling on the market regulator to take action.
Securities and Exchange Board of India (SEBI) rules prohibit algo sellers from influencing investors with any mention of future returns. But a large number of algo sellers bypass regulatory oversight by operating as software vendors, and the finfluencer has used a bridge platform that enables this.
Also read| What do experts say about regulations for finfluencers?
Mohammed Nasir or Md Nasir, who has a following of 69,400 on Twitter and of 3.65 lakh on YouTube, has been advertising an algo that is “expected” to deliver weekly profits of around 10 percent. That translates to an annual return of more 11,800 per cent on weekly compounding. If we assume a simple 10 per cent return every week, that translates to an annual return of 520 per cent. For perspective, the Sensex has posted a 12-percent compound annual growth rate over the last 10 years.
MoneyControl has written to Nasir and the article will be updated with his responses if and when they come in.
Nasir’s algo adverts on Twitter started a few days ago. There was one on March 20 and another on March 21. While the first asked for a minimum investment of Rs 5 lakh and promised returns more than three times the salary earned from a private or government job, the second raised the bar.
In the March 21 tweet, Nasir invited people to do live trading in his office. Seating was limited to 45 people. According to the tweet, the minimum capital needed would be Rs 50 lakh, weekly profit “expected” would be a “minimum” of Rs 5-6 lakh and finally—the big promise—of giving the user the promised profit if the profit isn’t made from trading.
This is an absolute no-no, according to an algo seller, who has sold a few algos that have been cleared by exchanges. “You cannot say anything that would influence the buyer such as implying a profit,” said the seller, who did not want to be named. According to Rajesh K, director of Alice Blue, an online brokerage, an algo seller cannot cite even past performance data in public spaces to influence buyers.
This rule applies to regulated algos that are sold through brokers. But there are many algo sellers who offer their products through platforms (not trading platforms) that claim to sell software or software as a service, and thus escape regulation. This is how it works: If an algo seller has a trading strategy, then he or she can use these “bridge” platforms that automate the strategy; carry promotional content that includes handpicked back-tested data, and indicate future return “targets”; and help link it to the prospective buyer’s trading account.
Nasir has used Tradetron, which is one such platform.
Investment advisory?
There are other problems that traders pointed to in Nasir’s tweet. He wrote, “Everything will be transparent, I will be with you in market hour (sic)”. Traders we spoke to believe that this is a promise that he will be available to guide people’s trades. Under SEBI rules, only registered investment advisors are allowed to do this and a search on the regulator’s registry of investment advisors did not show Nasir or his firm Baap of Chart (BoC) listed.
Traders’ suspicion of Nasir guiding trades is only reinforced by what is given on BoC’s website. On its home screen, there are details of a Premium WhatsApp Group Announcement. It says that, for a monthly fee of Rs 3,300, timely updates for entry and exit of trades and daily trade ideas will be sent directly to a person’s WhatsApp number.
This stands starkly in contrast to the disclaimer on his website that says that the information provided through the website is only for educational purposes and that the intention is not to provide “any financial advice, investment advice, trading advice, or any other advice”.
On fintwit, a platform for stock analysts, Nasir is a highly divisive figure. On the one hand there are people who identify themselves as Boc-ians (cult followers of Baap of Chart), and wonder about Nasir’s love life and vacationing alone. On the other hand, there are people who face down threats to challenge Nasir’s claims and amplify posts of complaints of fraud against him.
“He has built his following by sending small sums or goodies to people in dire need. Then he leverages their goodwill and posts to sell his workshops and trading calls,” said a market insider.