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TMI Blog2020 (2) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... ied out through www.fingravy.com, a preliminary examination was carried out in this matter and the, prima facie, findings of the same are given in the succeeding paragraphs. SEBI's EXAMINATION AND PRIMA FACIE FINDINGS 3. As per the details available on the website, www.fingravy.com is run under a brand name called Fingravy Strategic, which was established in 2008 by Mr. Ashutosh Sharma. As on January 09, 2020, the aforesaid website is active. The entity also has a presence on Facebook. 4. While presently the website does not have the option of 'Payment' on its home page, from the past records of the website obtained from archive.org, it can be seen that the entity accepted payment through payment gateway "Avantgarde", which accepts payments via debit/credit cards, net banking and wallets, if a client wishes to subscribe to their 'advisory services'. Further, the entity had provided the following bank accounts on its website for clients who wish to make offline payment: Bank Account No/Account type IFSC Code Brach Code (Branch Name) HDFC Bank 50200028467394 (Current) HDFC0001240 452240005 (Race Course Road) Axis Bank 917020083741307 (Current) UTIB00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/-. d. Mr. Ravindra Shelke has alleged that in December 2018 and January 2019, Fingravy has taken money from him in lieu of advisory services (Rs. 6 lakh as advisory fee, Rs. 3,85,000/- and Rs. 69,300/- as GST, Rs. 36,000 as terminal charges and Rs. 1 lakh as report charges). e. Mr. Sunil Chakravarti has alleged that in January 2019 he received a call from Fingravy and was asked to pay Rs. 2000/- in the first instance in lieu of investment advice. Subsequently, he was made to pay Rs. 11,000/- and Rs. 7000/-. However, he has not received any investment advice or bills/documents from Fingravy. 7. It was observed from archives of the website that till as early as May 2019, Fingravy was displaying the SEBI Registration No. of INZ000176037, while presently, it is mentioned on their website that they have applied for a license from SEBI; however, it is observed from the records of SEBI that Fingravy is neither registered with SEBI in any capacity nor has it applied for registration as an Investment Adviser/Research Analyst with SEBI. From the material available on record, I note the SEBI Registration No. of INZ000176037, in fact, belongs to SEBI Registered Stock broker, viz., Finv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of our services for the Equity Market, we have various packages for Intraday Cash, HNI Cash, Delivery Pack, Stock Cash BTST, Cash Blue Chip, etc., at various price points. Illustration of one of the subscription package provided by Fingravy and the fees for the same are as under: Intraday Cash Fees (in Rs.) Monthly 7,500/- Quarterly 20,000/- Half yearly 35,000/- Yearly 50,000/- HNI Cash Fees (in Rs.) Monthly 20,000/- Quarterly 45,000/- Half yearly 80,000/- Yearly 1,00,000/- Commodity Bullion Fees (in Rs.) Monthly 10,000/- Quarterly 27,000/- Half yearly 50,000/- Yearly 90,000/- 11. Further, as per the website of Fingravy, it was observed that they charge advisory fee which ranges from: Initial planning Fee Monthly Retainer Fee Rs. 50,000- Rs. 3,00,000 Rs. 50,000- Rs. 1,50,000 On the website, it is mentioned that the fee includes 2-3 meeting, ongoing review, annual comprehensive review, and anytime access for questions as they arise. Further, it is also stated that cost of planning will depend on its scope: a. Financial Advice/Analysis (minimum charge) →Rs. 50,000 b. Retirement Planning "Mini- Strategies" →Rs. 75, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,708.36/- Rs. 1,290.74/- Aug 23, 2019 Total Rs. 6,13,33,946.79/- d. It is observed that there are large number of payments received through various payment gateways/IMPS or NEFT. From the narrative of the transactions, it appears that the payments have, prima facie, come from various individuals. e. The credit transactions in the bank accounts, prima facie, are proceeds from the business operations of Fingravy and considering that it is showing multiple advisory services as its business operation in its website, it leads to the, prima facie, conclusion that the said proceeds are consideration for their advisory services. 15. Considering the above analysis of the details of website of Fingravy, payment receipts, and bank statement of Fingravy, I, prima facie, observe that Fingravy has represented as follows: a. Fingravy is an investment advisory firm that provides tips for the stock and commodity markets. b. Fingravy offers services in the area of tax planning and investment planning and strategy for consideration. 16. Considering the above facts and circumstances especially, the content of the website of Fingravy coupled with the credit transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c recommendations, etc., to the investors and general public, and payment receipts of the complainant indicating the payment was made for receiving investment advice, the bank statement, prima facie, showing the credit for payment of fees, indicates that there is a preponderance of probability that Fingravy has acted as an investment advisor for consideration. 21. In view of the aforesaid discussions, I, prima facie, note that apart from holding itself out and acting as an investment adviser, Fingravy, through its website, had earlier falsely represented itself as having a SEBI registration number, which belonged to another intermediary, as evidenced from the archive web pages, while presently it has represented that it has applied for a license from SEBI in order to deal in various fields of securities market. Therefore, it is, prima facie, held that Fingravy is claiming/asserting to the general public of facts which it knows are not true i.e., Fingravy knows that the registration number mentioned on its website did not belong to it and that presently, it has not applied for any registration with SEBI and is also actively concealing the truth that it is not authorized to deal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious provisions of the IA Regulations. Thus, the activities of Fingravy are, prima facie, in violation of Section 12(1) of SEBI Act read with Regulation 3(1) of the IA Regulations. 25. As discussed in the preceding paragraphs, on their website, Fingravy had earlier displayed the SEBI Registration Number of another intermediary, while presently it has claimed to have applied for a license to SEBI for providing services in the securities market. Fingravy claims to provide "independent advice" in various field of securities markets. The analysis of bank accounts mentioned on the website shows that Fingravy has received money in various denominations from various individuals all across the country. These proceeds, as discussed in preceding paragraphs, prima facie, leads to the inference that they are consideration for the services that Fingravy provides in the securities market. Thus, Fingravy has misrepresented to the general public that (a) it was registered with SEBI (by displaying the registration number of another intermediary) and (b) it has applied for a license from SEBI. Through this misrepresentation, Fingravy has further concealed the truth that they are not authorized to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under. 4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:- ** ** ** (k) disseminating information or advice through any media, whether physical or digital, which the disseminator knows to be false or misleading and which is designed or likely to influence the decision of investors dealing in securities". Issue No. 3: If answers to Issue Nos. (1) & (2) are affirmative, whether the present and past directors of Fingravy are responsible for the violations committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a matter of this description, the income-tax authorities are entitled to pierce the veil of corporate entity and to look at the reality of the transaction. It is true that from the juristic point of view, the company is a legal personality entirely distinct from its members and the company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members. But, in certain exceptional cases, the court is entitle to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade." 28. I also place reliance on the decision of Hon'ble Supreme Court (Larger Bench) in the matter of LIC Vs. Escorts Limited (1986 AIR 1370) , wherein while discussing the doctrine of corporate veil, the Court had observed: "90. ... the corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within which investment advisers will operate and also make them duly accountable for their investment advice by requiring investment advisers to comply with the criteria set out in the relevant provisions of the IA Regulations. The same is imperative for the protection of interests of investors and to safeguard the integrity of the securities market. In the instant case, Fingravy is soliciting and inducing the investors to deal in securities market on the basis of investment advice, stock tips etc., prima facie, without having the requisite registration/certification as mandated under the IA Regulations. Similarly, the PFUTP Regulations seeks to curb fraudulent and manipulative activities in the securities market in order to boost investor confidence in the securities market and to provide an environment conductive to increased participation and investment in the securities market which is vital to the growth and development of the economy. Further, it is noted from material available on record, money has been credited to the Bank accounts of Fingravy as recently as September 2019. This, prima facie, indicates that Fingravy not only continues to carry on its activity of holding it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Fingravy, both past and present, may also divert the money from their bank accounts to avoid their liability for the violations of Fingravy. The same may result in defeating the effective implementation of the direction of refund, if any to be passed after deciding the matter on merits. Non-interference by the Regulator at this stage would therefore result in irreparable injury to interests of the securities market and the investors. It therefore becomes necessary for SEBI to take urgent steps of stopping the debits from the bank accounts of Fingravy and its Directors. 35. In view of the foregoing, pending conclusion of enquiry, in order to protect the interests of investors and integrity of the securities market, I, in exercise of the powers conferred upon me under Sections 11, 11(4), 11B and 11D read with Section 19 of the SEBI Act hereby issue by way of this interim ex-parte order, the following directions: a. M/s. Fingravy Wealth Creation Services Pvt. Ltd. and its present directors namely, Mr. Dhiraj Gupta and Mr. Sumit Kumar, are directed to: i. Cease and desist from acting as an investment advisor including the activity of acting and representing through any med ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow any debits/withdrawals from and credits to the said accounts, without the permission of SEBI. The Banks are directed to ensure that all the above directions are strictly enforced. e. Banks wherein the directors of Fingravy, both present and past, namely, Mr. Dhiraj Gupta, Mr. Sumit Kumar, Mr. Hemanchal Singh, Mr. Ravindra Singh and Mr. Ashutosh Sharma are holding bank accounts, are directed not to allow any debits/withdrawals from the said accounts, without the permission of SEBI. The Banks are directed to ensure that all the above directions are strictly enforced. f. The Depositories are directed to ensure that till further directions no debits are made in the demat accounts of Fingravy and its directors (present and past) namely, Mr. Dhiraj Gupta, Mr. Sumit Kumar, Mr. Hemanchal Singh, Mr. Ravindra Singh and Mr. Ashutosh Sharma, held jointly or severally. g. The Registrar and Transfer Agents are also directed to ensure that till further directions the securities, including Mutual Fund units, held in the name of Fingravy and its directors (present and past) namely, Mr. Dhiraj Gupta, Mr. Sumit Kumar, Mr. Hemanchal Singh, Mr. Ravindra Singh and Mr. Ashutosh Sharma, jo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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