From Double Fees to Misleading YouTube Claims: All the Ways Basant Maheshwari Firm Broke SEBI Rules

Ishika Guptaon 4 minute read
4 minute read

We missed this earlier: The Securities and Exchange Board of India (SEBI) has imposed a monetary penalty of Rs 4 lakh on Basant Maheshwari Wealth Advisers LLP for violating SEBI’s 2013 Investment Adviser Regulations. The fine was levied after an inspection of Maheshwari’s firm from October to December 2023.

For context, in India, only SEBI-registered investment advisers (IAs) can provide investment advice/recommendations, and they are required to meet certain basic criteria like defined educational qualifications, work experience, and a worth of Rs 5 lakh in assets to do so.

Double charging of fees

To begin, SEBI deemed that the firm was charging 32 clients fees from both, the fixed fee method and the assets-under-advice (AuA) mode. This infringed Regulation 15A of SEBI’s guidelines, which stipulated that investment advisers can charge clients by only one mode on an annual basis, and any such change in mode shall take effect after 12 months of the onboarding or such indication.

Notably, the company had previously claimed that the multiple advisory services it offers to clients fall within the ambit of SEBI’s guidelines that envisage such a situation. Besides this, the firm claimed to charge a quarter’s fee in advance to clients’ portfolios beset with AuA-based pricing in compliance with IA norms. However, SEBI argues that the process must contain certain guardrails, like informing clients about AuA details and maintaining records for the same.

Annual audit

The firm also failed to conduct annual audits required for a portfolio manager (PM) as per SEBI’s guidelines. The market regulator stated that Maheshwari conducted the investment advisory business by exploiting its portfolio manager registration (instead of an IA registration) and utilising the exemption provided to PMs under the IA Regulations.

Responding to SEBI’s observation, the company claimed to undertake risk profiling, suitability assessment, know-your-customer (KYC) check, signing advisory agreement, etc., as mandated by applicable advisory regulations while onboarding advisory clients. However, since the firm offered IA services as registered PMs, they claimed to undertake the internal audit of the portfolio management services (PMS) business in line with applicable PMS norms. Additionally, the firm will be conducting audits in accordance with IA regulations from the current fiscal year (FY 2024-25) onwards, noting that the company had just received its IA license.

Wrongful advertising practices

SEBI also accused Maheshwari of uploading videos with exaggerated captions on his YouTube channel. Examples of these captions include: “100X Portfolio- 3 Saal Mei? Kaise Kiya?“, “1 Crore Ko Double Kaise Kare?? Explained in 2 Minutes“, “10 Saal Mei 10 Guna Aur 20 Saal Mei 100 Guna!! Kaise Kare??“, etc.

Notably, the firm contends that the videos are curated for educational purposes and “knowledge-sharing motives” among the general public instead of influencing investors to engage in the sale of stocks. In their response to the Board, the company also stated that Basant Maheshwari, in delivering insights/views on different securities, refrains from recommending any stock for its purchase or sale, thereby arguing that the videos don’t fall “within the ambit of advertisement.” Additionally, the firm argued that since the videos provide investor education, they aren’t liable to the advertisement code under the Finfluencer guidelines issued by the body. SEBI’s show cause notice “cherry-picks the titles of the videos and fails to appreciate the true meaning and import behind such videos,” the firm opined. Besides this, the company also mentions voluntarily adding the Standard Disclaimer Clause as per SEBI’s Circular in the description box of its YouTube channel.

However, SEBI opined that Maheshwari provides a link to his smallcase website in the description box of the channel with the statement “Invest in our smallcase,” thereby influencing investors and constituting an advertisement. Further, concerning the standard disclaimer, SEBI contends that it hasn’t been listed explicitly and instead uploaded through a PDF link on the description. Finally, Maheshwari’s videos contravene SEBI’s advertising code, which bars statements inconsistent, exaggerated, or unrelated to the nature of the risk and return profile of the product.

Other pleas by the firm

In addition to arguing against the previous claims made by SEBI, Maheshwari Wealth Advisers appealed against the imposition of any monetary penalty, citing the tarnishing of its reputation and “detrimental effect on the investor confidence”. Notably, while the firm initially filed to settle with matter, it later withdrew the application, allowing the proceedings to continue. Ultimately, the company was ordered to pay the penalty within 45 days of the receipt of the order, failing which SEBI may initiate “consequential actions” against it, including undertaking recovery proceedings via the attachment and sale of movable and immovable properties.

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Why does it matter?

This judgement comes amid the market regulator tightening its vigil on unregistered financial influencers (or finfluencers). To explain, in the past year, SEBI directed all regulated entities (REs) to terminate existing contracts with unregistered individuals providing advice on securities without its permission, except if the individuals are associated through a “specified digital platform.” This mandate followed SEBI fining finfluencers like Baap of Chart and PR Sundar Rs 17.2 crore and Rs 6 crore, respectively for providing investment advice without registering with the Board.

In January 2025, SEBI further restricted market entities from engaging with finfluencers and forbade educators from using the market price data of the preceding three months or the code name of any security while sharing their content.

Later, the Board issued an advisory mandating verification for REs uploading advertisements on social media platforms. As per SEBI’s directions, such entities must sign up on social media platforms using their SEBI-registered email IDs and mobile numbers, following which they would be scrutinised under advertiser verification by platforms like Meta and Google. This action followed SEBI alongside social media platforms, removing 70,000 misleading posts and handles since October 2024.

Advertisement code applicable for all communications?

Coming back to the judgement, SEBI reaffirms and explicitly notes that the advertisement code applies to any form of communication issued by investment advisers (including on social media) that influences investment decisions. Further, in deeming the inadequacy of the disclaimer listed in the video description boxes, it directs the attention of investment advisers to properly and overtly making such mentions. Finally, as the regulator clamps down further on advertisements, finfluencers, and social media claims, it will be interesting to note how regulated entities adapt to the norms and how many enforcement actions the body takes.

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