SEBI Interim Order Halts Fingravy's Unauthorized Activities

SEBI issued an interim ex-parte order directing Fingravy and its directors to cease unauthorized investment advisory activities, not to divert funds, and to provide a full inventory of their assets. Banks were directed to freeze Fingravy's accounts. This order was issued to protect investors and maintain market integrity, pending further investigation and final adjudication.

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Issues Involved:

1. Whether Fingravy is, prima facie, holding itself out and acting as an investment adviserRs.
2. If the answer to Issue No. (1) is affirmative, whether Fingravy has, prima facie, violated any securities lawsRs.
3. If answers to Issue Nos. (1) & (2) are affirmative, whether the present and past directors of Fingravy are responsible for the violations committed by FingravyRs.
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 directorsRs.

Issue-wise Detailed Analysis:

Issue No. 1: Whether Fingravy is, prima facie, holding itself out and acting as an investment adviserRs.

SEBI conducted a preliminary examination of Fingravy's activities based on complaints and information available on its website. The website claimed Fingravy provided various financial advisory services, including stock market tips and investment planning, and charged fees for these services. Payment receipts and bank statements indicated significant transactions from individuals, suggesting fees for advisory services. The website also falsely displayed a SEBI registration number belonging to another intermediary and claimed to have applied for a SEBI license. Based on these findings, SEBI concluded that Fingravy was, prima facie, acting as an investment adviser without proper registration.

Issue No. 2: If the answer to Issue No. (1) is affirmative, whether Fingravy has, prima facie, violated any securities lawsRs.

SEBI noted that as per Section 12(1) of the SEBI Act and Regulation 3(1) of the IA Regulations, any person acting as an investment adviser must obtain a certificate of registration from SEBI. Fingravy, despite holding itself out as an investment adviser, did not possess such a certificate. Additionally, Fingravy misrepresented itself as SEBI-registered by displaying another intermediary's registration number and falsely claiming to have applied for a SEBI license. These actions were deemed fraudulent under Section 12A(c) of the SEBI Act and Regulations 3(a), (b), (c), (d) and 4(1), 4(2)(k) of the PFUTP Regulations.

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 by FingravyRs.

SEBI held that a company acts through its directors, who are responsible for its conduct. The directors of Fingravy, both present and past, were deemed liable for the company's violations as they were in charge during the period the violations occurred. The directors were expected to exercise due care and diligence, and their failure to ensure compliance with statutory provisions made them accountable for the company's actions.

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 directorsRs.

Given the ongoing nature of Fingravy's unauthorized activities and the potential threat to investors, SEBI found it necessary to take urgent preventive action. SEBI directed Fingravy and its directors to cease all investment advisory activities, not to divert funds, and to provide a full inventory of their assets. SEBI also directed banks to freeze Fingravy's accounts and prevent any debits/withdrawals. These measures were deemed essential to protect investors and maintain the integrity of the securities market.

Conclusion:

SEBI issued an interim ex-parte order directing Fingravy and its directors to cease unauthorized investment advisory activities, not to divert funds, and to provide a full inventory of their assets. Banks were directed to freeze Fingravy's accounts. This order was issued to protect investors and maintain market integrity, pending further investigation and final adjudication.

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