2026 (1) TMI 1580 - AT - SEBI

Prima facie regulatory breach upheld; interim security reduced and asset restraint with disclosure ordered pending final adjudication.

The Tribunal found a prima facie case of regulatory breaches based on alleged use of live market data, post-warning testimonials, paid advisory groups and ... Validity of impugned ex-parte interim order cum show cause notice - Without obtaining registration, providing investment advisory and research analyst services under the guise of their stock market training programmes to a large number of investors - recklessly misleading, soliciting and inducing the investors to deal in the securities market on the basis of their advice - legality and correctness of the impugned order - impugned order in gross violation of Article 14, 19(1)(g) and Article 21 of Constitution of India. Prima facie case for contravention of SEBI (Investment Advisers) Regulations, 2013 and SEBI (Research Analysts) Regulations, 2014 - HELD THAT: - The Tribunal recorded that the IA and RA Regulations were in force during 2020-2025, that testimonials were uploaded after SEBI's administrative warning, that material seized in search operations (including video recordings and WhatsApp group communications) supported an inference that live market data and stock recommendations were used in paid forums, and concluded that these materials together establish a prima facie case of violation of the IA and RA Regulations. The appellants had chosen not to address factual submissions before the Tribunal and the Tribunal therefore refrained from making final factual findings, but found the present record sufficient to sustain a prima facie inference of regulatory contravention. [Paras 32] Held that SEBI has made out a prima facie case of violation of the IA and RA Regulations Whether the impugned interlocutory directions securing a sum alleged to be attributable to unregistered activity required interference and, if so, what modification was appropriate - HELD THAT:- The Tribunal accepted SEBI's calculation attributing a portion of collected fees to unregistered activities but recognised claimed payments to government and asserted value of fixed assets. Balancing the prima facie case against appellants' contentions as to lack of available liquid funds, the Tribunal declined to set aside SEBI's measures entirely but modified them: instead of directing deposit of the full sum SEBI sought to secure, the Tribunal directed deposit of a lesser sum and imposed a restraint on alienation of fixed assets coupled with a requirement to disclose assets with valuation by a SEBI-certified valuer. The Tribunal left final determinations (including tax issues and merits) to the WTM after the appellants file their replies, and clarified that observations in the order are not binding on the WTM's final adjudication. [Paras 33, 34, 36] Modified the impugned interlocutory directions by directing deposit of Rs.100 Crores, restraining alienation of fixed assets and requiring disclosure and valuation of assets; otherwise left merits for final adjudication by the WTM Final Conclusion: The Tribunal found a prima facie violation of the IA and RA Regulations for the period 2020-2025 and, while declining to quash SEBI's interim measures, modified the interlocutory directions by requiring a deposit of Rs.100 Crores, restraint on alienation of fixed assets and disclosure with valuation, and directed the appellants to file replies for final adjudication by the WTM. Issues: (i) Whether the impugned ex-parte interim order cum show cause notice dated 04.12.2025 passed by the Whole Time Member, SEBI calling for directions including deposit/impoundment and prohibitions calls for interference; (ii) Whether the quantum of amount sought to be secured/impounded by SEBI (Rs.546 Crores) is justified and what interim security, if any, should be directed.Issue (i): Whether the impugned interim directions require interference by the Tribunal.Analysis: The record shows allegations of use of live market data, testimonials uploaded after an administrative warning, paid WhatsApp groups providing recommendations and trading patterns of participants; the appellants declined to contest factual aspects before the Tribunal and the matter is at the stage of reply to the show cause notice. The material on record supports a prima facie inference of violations of SEBI (Investment Advisers) Regulations, 2013 and SEBI (Research Analysts) Regulations, 2014 for the period under consideration (2020-2025).Conclusion: The Tribunal finds a prima facie case established by SEBI and does not set aside the impugned ex-parte interim directions.Issue (ii): Whether the amount of Rs.546 Crores sought to be secured is justified as interim impoundment and what modification, if any, is appropriate.Analysis: SEBI attributes Rs.546 Crores to fees for specified unregistered activities. Appellants produced a schedule showing taxes and other outlays and asserted fixed assets and amounts paid to government. The Tribunal accepted that some sums (taxes and governmental receipts) and fixed assets exist but declined to decide final entitlement or tax character; balancing the prima facie case and the appellants' submissions on assets, the Tribunal found it equitable to reduce the interim monetary security to a realistic secured amount while protecting SEBI's interest.Conclusion: The Tribunal modifies the impugned directions and directs deposit of Rs.100 Crores in lieu of the earlier security; it further restrains alienation of fixed assets subject to disclosure and valuation and permits the appellants to file reply to the show cause notice.Final Conclusion: The appeal is allowed in part; the Tribunal upholds the existence of a prima facie case against the appellants but moderates the interim monetary relief ordered by SEBI by directing a deposit of Rs.100 Crores and ancillary disclosure and restraint on alienation, while leaving all substantive issues open for final adjudication by the Whole Time Member, SEBI.