Frauds

Every other risk in this subject is a possibility you accepted in exchange for something. This one is theft, and it deserves separate treatment because none of the portfolio reasoning applies to it.

Registration is the first filter

SEBI's guidance opens with it:

Always deal with SEBI registered Investment Advisers.

And then tells you how to verify rather than asking you to trust:

Check for SEBI registration number. Please refer to the list of all SEBI registered Investment Advisers which is available on SEBI website

Acting as an investment adviser without registration is not a technicality — it is unlawful. So the first question about anyone offering advice has a checkable answer, published by the regulator, and checking takes two minutes.

The failure mode is specific: people are told a registration number rather than looking one up. A number on a website is a claim. The entry on SEBI's list is the fact.

Assured returns

The clearest signal there is, and SEBI names it twice — once in the do's and once in the don'ts:

Inform SEBI about Investment Advisers offering assured or guaranteed returns.

Don't fall for the promise of indicative or exorbitant or assured returns by the Investment Advisers. Don't let greed overcome rational investment decisions.

Nobody can guarantee a market return. Everything in this course says why: chapter 2 of the equity subject on where returns come from, chapter 3 of the fixed income subject on prices moving, chapter 10 of the derivatives subject on what happens to people who were sure.

So a guaranteed market-linked return is not an unusually good product. It is a statement that cannot be true, and the person making it knows that better than you do.

Never hand over the money

The single most important line, because it separates a bad adviser from a thief:

Do not give your money for investment to the Investment Adviser.

An adviser advises. Your money goes to your own demat account, your own folio, your own bank-linked investment. The moment funds move to an individual or an entity for them to invest on your behalf, every protection in this course has been left behind.

SEBI pairs it with how fees should work:

Pay only advisory fees to your Investment Adviser. Make payments of advisory fees through banking channels only and maintain duly signed receipts

Advisory fees, through a bank, with receipts. Not cash, not a personal account, not a share of profits held by them.

The rest of SEBI's list

The remaining items, each of which exists because something happened to somebody.

Ask for risk profiling, and insist advice is given on that basis. An adviser who recommends before asking about your circumstances is not advising.

Get terms in writing, signed and stamped — fees, plans, the category of recommendations.

Don't fall for stock tips offered under the pretext of investment advice.

Don't get carried away by luring advertisements or market rumours.

Avoid doing transactions only on the basis of phone calls or messages, and don't act "just because of repeated messages and calls".

Do not fall prey to limited period discount or other incentive, gifts offered by advisers.

Don't rush into investments that do not match your risk taking appetite and investment goals.

Read together, those describe a pattern rather than a list: urgency, repetition, incentives, and pressure to act before thinking. Every one is a technique for preventing the two minutes it would take to check.

The modern shapes

The techniques are old and the packaging changes.

Social media tips and groups promising a daily or weekly percentage. The percentage is the tell — chapter 2 of the equity subject on what returns actually come from.

Courses promising guaranteed trading income. Chapter 10 of the derivatives subject is the response: 91% of individual traders lost money for four consecutive years, measured by the regulator across ninety-six lakh people.

Fake applications and cloned websites that show a rising balance you cannot withdraw. The balance is a number on a screen controlled by the person who wants more of your money.

Someone trading "on your behalf" in your account or theirs. Covered above, and absolute.

Recovery schemes that approach victims of an earlier fraud offering to retrieve the money for a fee. The second loss is common and it targets exactly the people least able to absorb it.

The four questions

Before any money moves:

1. Is the entity registered, and did I verify it on the regulator's own site?
2. Is any return being assured, implied or illustrated as certain?
3. Where does my money physically go — my account, or theirs?
4. Why is there urgency? Legitimate investments are available tomorrow.

An approach failing any one of these is finished. There is no second opinion to seek, because the first opinion is the regulator's published guidance.

If it has happened

Complain to SEBI through SCORES for securities matters, to the relevant regulator for insurance or banking, and to the police for theft. Document everything — messages, receipts, transfers.

And treat any subsequent offer to recover the money as the next fraud, because it usually is.

The point

Advising without SEBI registration is unlawful, so registration is checkable on SEBI's own list rather than taken on trust. Assured returns cannot exist in a market product. Your money goes to your own accounts and only advisory fees go to an adviser, through banking channels, with receipts — and urgency exists to prevent the two minutes of checking that would end it.