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2023 (3) TMI 1404 - Board - SEBIUnregistered investment advisory activities - Investment Advisers working without obtaining registration from SEBI in violation of the provisions of Section 12(1) of the SEBI Act read with Regulation 3(1) of the Investment Advisers Regulations - Penalty for fraudulent and unfair trade practices HELD THAT - SCN does not mention the amount of disproportionate gain or unfair advantage made as a result of the default or the amount of loss caused to an investor or group of investors. However, as stated in Table 2, I find that an amount of ₹2,96,84,143 was credited to the accounts held in the name of Noticee 1 in relation to offering investment advisory services. Thus imposition of minimum penalty is warranted in the instant proceedings, which would be commensurate with the violation committed by Noticees 3 and 4, who were the partners of Noticee 1. ORDER In exercise of the powers conferred upon me in terms of Sections 11, 11B(1) and 11(4) along with Sections 11(4A) and 11B(2) read with of Sections 15HA, 15HB and 19 of the SEBI Act and Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995, hereby issue the following directions (a) Noticees 1, 3 and 4 i.e. M/s India investment Financial Services, Anant Rathore and Vijesh Joshi, shall jointly and severally, within a period of three months from the date of coming into force of this Order, refund the money received from any Complainants /investors /clients, as fees /consideration or in any other form, in respect of their unregistered investment advisory activities. (b) Noticees 1, 3 and 4 shall cause to effect a public notice in all editions of two National Dailies (one English and one Hindi) and in one local daily with wide circulation, inviting claims from Complainants /investors /clients within a period of fifteen (15) days from the date of this Order. The said public notice shall detail the modalities for refund, including the details of the contact persons such as names, addresses and contact details. A period of two (2) months from the date of the publication of the public notice shall be provided to the Complainants /investors /clients for submitting their claims. (c) The repayments to the Complainants /investors /clients shall be effected only through Bank Demand Draft or Pay Order or electronic fund transfer or through any other appropriate banking channels, which ensures audit trails to identify the beneficiaries of repayments. (d) After completing the refund as directed in paragraph 29(a) above, Noticees 1, 3 and 4 shall file a report detailing the amount refunded to Complainants /investors /clients, which should be addressed to the Division Chief, Division of Post-Inspection Enforcement Action, Market Intermediaries Regulation and Supervision Department, SEBI as duly certified by an independent Chartered Accountant and should indicate the amount of refund, mode of payment by bank transactions, name of the parties, communication address, mobile / telephone numbers, etc. (e) The remaining balance amount shall be deposited with SEBI, which shall be kept in an escrow account for a period of one year for distribution to clients / investors who were availing the investment advisory services from the Noticees. Thereafter, the remaining amount, if any, shall be deposited in the Investors Protection and Education Fund, maintained by SEBI. (f) Noticees 1, 3 and 4 are restrained from selling their assets, properties and holding of mutual funds /shares /securities held by them in demat and physical form except for the sole purpose of making the refunds /depositing balance amount with SEBI, as directed above. Further, the banks are directed to allow debits only for the purpose of making refunds to the Complainants /investors /clients who were availing the unregistered investment advisory services from the Noticees, as directed in this Order, from the bank accounts of the Noticees. (g) Noticees 1, 3 and 4 are debarred from accessing the securities market, directly or indirectly, and are prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in any manner whatsoever, for a period of 3 (three) years from the date of this Order or till the expiry of 3 (three) years from the date of completion of refunds to Complainants /investors /clients along with depositing of balance amounts, if any, with SEBI, as directed in paragraphs 29(a) and (e), whichever is later. (h) Upon submission of the report on the completion of refund to clients/investors to SEBI and deposit of the balance amount, if any, with SEBI, the direction at paragraph 29(f) shall cease to operate within 15 days thereafter. (i) The Noticees shall not undertake, either during or after the expiry of the period of debarment /restraint as mentioned in paragraph 29(g), either directly or indirectly, investment advisory services or any activity in the securities market without obtaining a Certificate of Registration from SEBI, as required under the securities laws. (j) Noticees 3 and 4 are also imposed with the penalty,. (k) Noticees 3 and 4 shall forward the said confirmation of e-payment made in the format as given. The above direction for refunds /repayment to clients /investors and depositing the balance amount with SEBI, as given in paragraphs 29(a) and (e) above, does not preclude such Complainants /investors /clients from pursuing other legal remedies available to them under any other law against the Noticees for refund of money or deficiency in service. This Order shall come into force with immediate effect.
Issues Involved:
1. Unregistered Investment Advisory Services 2. Misrepresentation as SEBI Registered Entity 3. Refund and Penalty Obligations Summary: Issue 1: Unregistered Investment Advisory Services SEBI received complaints alleging that M/s Investment India Financial Services (IIFS) and its partners, Anant Rathore and Vijesh Joshi, provided investment advisory services without SEBI registration, violating Section 12(1) of the SEBI Act and Regulation 3(1) of SEBI (Investment Advisers) Regulations, 2013. The examination revealed that IIFS offered advisory services through its websites, falsely claiming SEBI registration. The bank accounts associated with IIFS received Rs. 2,96,84,143 from clients for these services. Issue 2: Misrepresentation as SEBI Registered Entity The SCN alleged that IIFS misrepresented itself as a SEBI registered investment adviser, violating Sections 12A(a), (b), and (c) of the SEBI Act and Regulations 3(a), (b), (c), and (d) of the PFUTP Regulations. The websites of IIFS falsely disclosed SEBI registration, misleading investors. SEBI found that IIFS, by holding itself out as a registered entity, engaged in fraudulent activities. Issue 3: Refund and Penalty Obligations SEBI directed IIFS, Anant Rathore, and Vijesh Joshi to refund Rs. 2,96,84,143 to clients within three months. They must publish a public notice inviting claims from clients and provide refunds through verifiable banking channels. A report certified by an independent Chartered Accountant detailing the refunds must be submitted to SEBI. Any remaining balance should be deposited with SEBI for further distribution or transferred to the Investors Protection and Education Fund. Additionally, SEBI imposed penalties of Rs. 5,00,000 under Section 15HA and Rs. 1,00,000 under Section 15HB of the SEBI Act on both Anant Rathore and Vijesh Joshi. The Noticees are debarred from accessing the securities market for three years or until the completion of refunds. Order: 1. Refund of Rs. 2,96,84,143 to clients within three months. 2. Public notice in national and local dailies inviting claims. 3. Refunds through verifiable banking channels. 4. Submission of a Chartered Accountant certified report detailing refunds. 5. Remaining balance to be deposited with SEBI. 6. Debarment from accessing securities market for three years. 7. Penalties of Rs. 5,00,000 and Rs. 1,00,000 on Anant Rathore and Vijesh Joshi. 8. Prohibition on undertaking investment advisory services without SEBI registration. This Order is effective immediately and must be complied with by the Noticees.
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