SEBI Bars Appellant From Securities Market for 3 yrs for Providing Unlicensed Investment Advisory Services | SAT

Case Details: Investment Research Advisor v. Securities and Exchange Board of India - [2023] 154 taxmann.com 254 (SAT-Mumbai)

Judiciary and Counsel Details

• • Justice Tarun Agarwala, Presiding Officer & Ms Meera Swarup, Technical Member
  • CS Abhishek Mishra for the Appellant.
  • Akshay Kolte Patil, Akash Jain & Aditya Sarangarajan, Advs. for the Respondent.

Facts of the Case

In the instant case, SEBI received certain complaints based on which SEBI carried out an investigation into the affairs of the appellant. SEBI’s inquiry revealed that the appellant was carrying on investment advisory services without having a certificate either from the National Institute of Securities Market (NISM) or from any other organization including the Financial Planning Standards Board of India or any recognized Indian stock exchange.

This action was in violation of Regulation 6(b) and Regulation 7(2) read with Regulation 13(a) of the Investment Advisors Regulations.

In addition to this, the appellant was also promising assured/guaranteed returns to clients, charging unreasonable fees in collusion with another unregistered connected entity thereby violating regulations 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 read with Regulation 15(1) of the Investment Advisors (IA) Regulations.

SEBI thus, restrained the appellant from accessing the securities market for a period of three years and further restrained from undertaking either directly or indirectly investment advisory services or any activity in the securities market for a period of three years. Thereafter, an appeal was made to the Securities Appellate Tribunal (SAT) against the order passed by the SEBI.

SAT Held

The SAT held that the appellant was indicating assured unrealistic returns which lured clients to make bigger investments and therefore the appellant did not deal with his clients honestly and fairly and violated regulation 15(1) of the IA Regulations.

Further, the findings given by the SEBI that the appellant was engaged in providing assured returns and making promises of assured returns which was apparently fraudulent was correct and, therefore, violative of regulations 3 and 4 of the PFUTP Regulations.

Thus, the impugned order passed by the SEBI restraining the appellant from accessing the security market and taking investment advisory services for a period of three years and refunding monies received from investors was justified.