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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 ..... ields 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 the securities market in any capacity on behalf of investors, so as to lure investors to deal in securities based on their advice. 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 media (physical or digital) as an investment advisor, directly or indirectly, and cease to solicit or undertake such activity or any other activities in the securities market, directly or indirectly, in any matter whatsoever, until further orders. ii. Not to divert any funds raised from investors, kept in bank account(s) and/or in their custody until further orders. iii. Not to dispose of or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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) UTIB0003633 452211027 (Pardeshipura) ICICI Bank 091605001648 (Current) ICIC0000916 452229004 (Ratlam Kothi) It is noted that the above mentioned bank accounts are in the name of an entity, Fingravy Wealth Creation Services Pvt. Ltd. (hereinafter referred to as Fingravy ), which is registered with the Registrar of Companies, Mumbai. 5. The MCA Database was searched wherein the following details were found: a. Fingravy is a Private Limited Company incorporated on 13 November 2017. It is registered at RoC, Mumbai having CIN U73200MH2017PTC301697. Its registered address is Shop No:-168, Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ravindra Shelke has alleged that in December 2018 and January 2019, Fingravy has taken money from him in lieu of advisory services (₹ 6 lakh as advisory fee, ₹ 3,85,000/- and ₹ 69,300/- as GST, ₹ 36,000 as terminal charges and ₹ 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 ₹ 2000/- in the first instance in lieu of investment advice. Subsequently, he was made to pay ₹ 11,000/- and ₹ 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 Sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Strategy, etc. iv. As part 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business/type of profession of Fingravy has been stated to be as follows: Bank Nature of business/Type of profession ICICI Bank Wealth Creation Services Axis Bank Service Providers (Personal Financial Advisors) HDFC Bank Service Providers (Financial Consultancy) c. The transactions observed in the above mentioned bank accounts are summarized as under: Bank Account Opening Date Credits received from date of account opening till December 25, 2019 Balance (as on December 25, 2019) Last Credit Transaction Date ICICI Bank January 10, 2018 ₹ 3,58,67,382.13/- ₹ 976.93/- Sept 18, 2019 Axis Bank December 16, 2017 ₹ 40,19,856.3/- Nil Jul 29, 2019 HDFC Bank December 13, 2017 ₹ 2,14,46,708.36/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is registered with SEBI as an investment adviser/research analyst/stock broker. I also note that SEBI has not received any application for registration as investment adviser from Fingravy. Further, in any case, even if Fingravy has applied for registration to SEBI, it cannot hold itself out and act as an Investment Adviser without actually obtaining the registration from SEBI. 19. I have perused the definition of Investment Adviser as given in Regulation 2(m) of the IA Regulations, which states that Investment Adviser means any person, who for consideration, is engaged in the business of providing investment advice to clients or other persons or group of persons and includes any person who holds out himself as an investment adviser, by whatever name called . Further, I have perused Regulation 2(l) of the IA Regulations which defines Investment Advice as advice relating to investing in, purchasing, selling or otherwise dealing in securities or investment products, and advice on investment portfolio containing securities or investment products, whether written, oral or through any other means of communication for the benefit of the client and shall include financial planning. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made under this Act: Further, as per Regulation 3(1) of the SEBI (Investment Advisers) Regulations, 2013 (hereinafter referred to as the IA Regulations), the registration of the investment advisers is mandatory. It provides that, On and from the commencement of these regulations, no person shall act as an investment adviser or hold itself out as an investment adviser unless he has obtained a certificate of registration from the Board under these regulations . 23. The activities of Fingravy, as brought out from the various materials described above, seen in the backdrop of the aforesaid provisions show that Fingravy has holding itself out and acting as an investment adviser. However, no material is available on record to indicate that Fingravy has a certificate of registration as investment adviser or has applied to SEBI for the same. In this context, it is noted that Fingravy is not registered with SEBI in the capacity of an Investment Advisor and the characteristics and features of the business activity carried out by Fingravy, as discussed in the preceding issue, prima facie, leads to the conclusion that Fingravy is holding itself out and acting as an investment adviser w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder; PFUTP Regulations Regulation 3. Prohibition of certain dealings in securities No person shall directly or indirectly- (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. 27. The directors are statutorily expected to exercise due care and diligence as expected from a prudent person which among other things entails running the affairs of the company within the four walls of the relevant statutory provisions. Here, I would like to refer to the observations of the Hon'ble High Court of Delhi in the matter of Santanu Ray v. Union of India decided on August 12, 1989, wherein the Hon'ble Court observed as follows: 12. In Pennington's Company Law, 5th edition, at page 58, the topic of evasion of obligation imposed by law is discussed. The courts have ignored separate legal personality of the company if it was formed or used to facilitate the evasion of legal obligations. The American courts have disregarded a company's separate legal personality when it was clearly formed or acquired to facilitate a breach of the general law. In CIT v, Meenakshi Mills Ltd., their Lordships expressed that it is well established that in 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 compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n December 2017, while the latest credits have occurred in September 2019. 31. The fact that the money has been collected during the tenure of the above mentioned directors, both past and present, prima facie, in the form of fees for the services offered by Fingravy, indicates that the directors mentioned in the table above were involved at the time of the violations. Further the corporate entity has been used, prima facie, to perpetrate fraud on the investors. Thus, the, prima facie, violations committed by Fingravy, which have been discussed above, pertain to the time periods when the persons mentioned in the table above were acting as its directors. Therefore, I am of the view that all the present and past directors of Fingravy are, prima facie, responsible for the violations committed by it. Issue No. 4: If answers to Issue Nos. (2) (3) are affirmative, whether urgent directions, if any should be issued against Fingravy and its present and past directors? 32. SEBI has a statutory duty to protect the interests of investors in securities and promote the development of, and to regulate, the securities market. Section 11 of the SEBI Act has empowered it to take such meas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting lured towards the unregistered activity of Fingravy in the securities market is still in existence and imminent. The amount of money, prima facie, observed to have been collected by Fingravy is approximately ₹ 6.13 crores and indicates the magnitude of the prospective threat to the investors. Therefore, even today, investors can become prey to the different packages/services offered by Fingravy. In light of the same, I find that there is no other alternative but to take recourse through an interim ex-parte order against Fingravy for preventing them from collecting funds by defrauding investors and by indulging in unauthorized investment advisory services without obtaining the mandatory registrations from SEBI in accordance with the law. In order to protect prospective investors from making payment to the bank accounts of Fingravy, credit into bank accounts needs to be stopped. 34. Further, one of the directions that can be passed against Fingravy, including the directors (past and present) in view of use of a corporate entity for unauthorized investment advisory service, subject to the adjudication of the allegation on the merits in the final order, under Sections 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other unregistered activity in the securities market until further orders. b. M/s. Fingravy Wealth Creation Services Pvt. Ltd. and its directors (present and past) namely, Mr. Dhiraj Gupta, Mr. Sumit Kumar, Mr. Hemanchal Singh, Mr. Ravindra Singh and Mr. Ashutosh Sharma, are directed to: i. Not to access the securities market and buy, sell or otherwise deal in securities in any manner whatsoever, directly or indirectly, until further orders. If Fingravy Wealth Creation Services Pvt. Ltd. and its directors, named in this order, have any open position in any exchange traded derivative contracts, they are permitted to close out/square off such open positions within one month from the date of receipt/knowledge of this order. ii. To provide a full inventory of all assets held in their name, whether movable or immovable, or any interest or investment or charge on any of such assets, including details of all bank accounts, demat accounts and mutual fund investments, immediately but not later than 5 working days from the date of receipt of this order. c. Any person while working under Fingravy or any of the Directors under its/their instructions as employee or otherwise, sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant Regulations. 38. Fingravy Wealth Creation Services Pvt. Ltd. and its directors (present and past) may also show cause as to why appropriate directions, under Sections 11, 11(4), 11B and 11D of the SEBI Act and relevant SEBI Rules/Regulations, including directions to continue the prohibition on them from buying, selling or otherwise dealing in securities market, either directly or indirectly, in any manner whatsoever, for a particular period, directions to not be associated with any registered intermediary/listed entity in the securities market, in any manner whatsoever, and why any direction to refund the amount collected from the investors/clients for its various schemes under Sections 11 and 11B of SEBI Act should not be issued against them. 39. The, prima facie, observations contained in this Order are made on the basis of the material available on record. In this context, Fingravy Wealth Creation Services Pvt. Ltd. and its directors (present and past) may, within 21 days from the date of receipt of this Order, file their reply, if any, to this Order and may also indicate whether they desire to avail an opportunity of personal hearing on a date and time to be fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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