ASIC cuffs Kalkine with new license conditions for possible flouting of financial advice laws

Stock tips site Kalkine has run afoul of ASIC, which imposed new licence conditions on the firm over concerns its India-based staff illegally coached customers in Australia to buy and sell stocks.

Kalkine CEO Kunal Sawhney and Kalkine staff in India at the company's 2020 party.

The corporate regulator said stock tipster Kalkine, which operates a boiler room out of India, may have flouted its obligation to operate “efficiently, honestly and fairly” after revelations in The Australian its staff coached customers to buy and sell stocks.

The Australian Securities and Investments Commission imposed new license conditions on Kalkine on Friday, ordering it to engage consultants to review its procedures and report back to ASIC.

The Australian revealed in January 2023 Kalkine’s call centre staff veered into personal financial advice territory, despite being licensed to provide only general advice.

This was combined with high pressure sales tactics aimed at pushing customers, many of whom were retirees, to purchase its stock tips newsletters and in some cases, despite the customers’ own concerns the products were unsuitable.

In one instance, a 90-year-old warned the Kalkine sales staff he may be dead before the two-year contract he was offered would expire.

In another, Kalkine’s “senior account manager and head of research”, who identified himself as “Gabriel”, but whom The Australian is aware is known by several other names, spent 40 minutes attempting to convince a customer to spend $5500 on a newsletter, despite having already lost $6000 trading on previous Kalkine recommendations.

“Don’t think about it, trust me and we’ll make a lot of money,” “Gabriel” said.

And another former client, Toby Fricker, said he paid Kalkine almost $30,000 for its newsletters, and its sales staff gave him explicit instructions to buy and sell shares.

Toby Fricker photographed in Mandurah. Picture: Colin Murty

ASIC deputy chair Sarah Court said the regulator’s inquiries had raised concerns over Kalkine’s sales tactics and whether the firm had breached its financial license.

“As a result of our investigation we remain concerned that Kalkine fell short in meeting its obligations, leading ASIC to take the significant step of imposing new licence conditions,” she said on Friday in a statement.

“Kalkine will now undergo an external review to ensure it acts lawfully and within the scope of its licence.”

Kalkine has 25 days to appoint a consultant, with the stock-tips site required to pay for a report to ASIC within three months which assesses all its calls and correspondence.

ASIC noted where shortfalls are found in Kalkine’s interactions with customers, or in the supervision mechanisms within the firm, the independent consultant will make recommendations to improve standards.

Following this Kalkine must complete a second review outlining how the company responded to the first report as well as assessing whether any remediation for customers is required.

If the company is found to be non-compliant, the firm’s financial license may be cancelled and it may face legal action.

Ms Court said financial licensees are “responsible for the conduct of their representatives”.

ASIC deputy chair Sarah Court. Picture: NewsWire / Martin Ollman

Companies “must have adequate supervision arrangements in place to ensure their representatives comply with the law when engaging with customers”.

Kalkine’s India-based call centre staff often made wild claims to customers about the potential for its newsletters to deliver them investment success, as also revealed in The Australian.

These staff represented to customers they were based in Kalkine’s Sydney office, on George Street in the heart of the city.

Instead, they were thousands of kilometres away on the outskirts of New Delhi in the satellite city of Noida.

Noida has become an epicentre of fake call centres and scam boiler rooms.

One week ago, more than 14 people were arrested in a Noida boiler room where staff were operating a fake recruitment business.

ASIC is fundamentally concerned Kalkine’s representatives were attempting to offer personal financial advice as part of the firm’s subscription services.

The regulator also found Kalkine’s sales staff “may have misrepresented to customers the kind of advice being given, by qualifying this as general advice but leaving customers with the impression that the advice was directed to their own personal circumstances”.

ASIC found Kalkine had inadequate processes “to ensure that its representatives were complying with the law”.

Kalkine CEO Kunal Sawhney has repeatedly threatened legal action over coverage of Kalkine, with his lawyers warning there was “not a scintilla of evidence” to support the allegations made against the firm.

As part of a lengthy investigation ASIC interviewed former customers.

However, the regulator stopped short of slapping Kalkine with legal action.

Financial Planning Association chief executive Sarah Abood said companies had to understand the limits of their licensing, warning it was not appropriate to overstep the bounds.

“Being provided with general advice only or being treated as a wholesale or sophisticated client should give rise to questions of why they’re being treated this way,” she said.

Kunal Sawhney, who was a finalist in the India Australia Business & Community Alliance managing director of the year award, did not respond to attempts to reach him.

The 44-year-old built Kalkine from the ground up, after launching the business in 2014 following a stint at Sydney stock tips site Fat Prophets.

Mr Sawhney has been evasive when comment was sought about Kalkine’s business practices.

His public relations firm, GRACosway, told The Australian on his behalf: “Kalkine is not obliged to answer questions about its commercial operations”.

New Zealand’s Financial Markets Authority took aim at Kalkine in 2022.

The Commerce Commission also found Kalkine engaged in concerning conduct from December 2019 until at least July 2023.

Despite this, Mr Sawhney has repeatedly threatened legal action against The Australian, with his legal representative, Hamilton Locke, claiming he had been unfairly defamed.

Partner Tim Grave said there was “not a scintilla of evidence in support of the exceptionally serious high-level allegations contained within the Australian newspaper and the various websites”.

Mr Grave complained that Mr Sawhney had been “contacted by numerous family members, friends, colleagues, business associates and other acquaintances” in the wake of The Australian’s revelations Kalkine had pressured elderly customers into parting with thousands of dollars or were allegedly coached into trading their retirement savings.

Mr Sawhney lives in Sydney’s Upper North Shore.

Mr Grave complained that he and his family had been “approached by members of the school community asking questions”.

“Certain professional advisers have ceased acting for and providing advice to Kalkine and Mr Sawhney as a result of the article.”

Sydney lawyer and former non-executive director at Kalkine, Peter Bobbin, a consultant at Colman Grieg, walked away from the firm last year.

Despite extended public scrutiny, customers continue to complain about Kalkine’s products and services and the firm’s pushy sales tactics.

Originally published as ASIC cuffs Kalkine with new license conditions for possible flouting of financial advice laws