Buch calls for vigil about stock performance claims

livemint.com:

NEW DELHI : Investors must be cautious about stock performance claims being touted on social media, and the regulator is keen on creating an agency that will evaluate such claims, Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch said. Speaking at an event organized by the Association of Registered Investment Advisers (ARIA), Buch said some advisers were even providing illegal portfolio management services (PMS) to clients. More than a third of investment advisers offering stock market advice to small investors were not registered with Sebi as required under the law, she added.

Buch narrated instances where some platforms boasting of their algos generating 300% annual returns were found to have cherry-picked data. However, she acknowledged that making performance claims was vital for investment advisers to attract clients, which is why Sebi was pitching for a performance valuation agency. “Now, investment advisers have come and told us that look, you are saying don’t make a claim; how are we supposed to sell anything to our clients?" Buch said.

“We took that feedback—because whatever you don’t allow above the table will go under the table." Buch said this problem prompted Sebi to consider a valuation agency. On 1 September, it floated a consultation paper seeking public comments on the same. “This is a completely radical concept to say there would be an institutional mechanism...

you come there, you validate the claims." Buch said some were also illegally managing client portfolios, logging in and trading with their clients’ credentials. “Somebody asks (me) why are you not permitting a profit-sharing model for investment advisory?" Buch said. “Advisory means to give advice to somebody, and it’s