TaxTMI 
TaxTMI 
2020 (2) TMI 100
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....ent advisory activities are being carried 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 (Rac....
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....y wherein they asked him to register with them and assured him Rs. 10-15 thousand daily income. He paid them Rs. 2,43,000/- as fees and within one month they caused him a loss of Rs. 1,50,000/-. 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 registrati....
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.... can bias our judgment or recommendations. iii. Our services range from Indian Stock Market Advisory, Intraday Tips, Stock Trading Tips, Share Market Tips, Super Power Tips, Growing Wealth, Tax Planning, Investment Planning and 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 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 ....
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....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 Rs. 3,58,67,382.13/- Rs. 976.93/- Sept 18, 2019 Axis Bank December 16, 2017 Rs. 40,19,856.3/- Nil Jul 29, 2019 HDFC Bank December 13, 2017 Rs. 2,14,46,708.36/- 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 a....
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....alled". 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." 20. Therefore, the activity of Fingravy of holding itself to be giving trading tips, stock specific 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 fro....
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....ngravy 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 without a certificate of registration. 24. In my view, these activities/representations are in violation of various 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 vario....
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.... (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 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 incl....
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....f 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 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 ent....
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....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 measures as it thinks fit for fulfilling its legislative mandate. The PFUTP Regulations and the IA Regulations have been formulated with the main objective of regulating such activities to safeguard the interests of investors and hence registration of such activities with SEBI has been made mandatory. The IA Regulations, inter alia, seek to create a structure 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 i....
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.... 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, 11(4) and 11B of SEBI Act, is that of a direction to refund the money collected by them from their clients. With the initiation of quasi-judicial proceedings, it is possible that Fingravy may divert the money collected from their clients, especially taking into account the numerous withdrawals from the said bank accounts. It is also possible that the directors of 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 securitie....
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....dge 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, shall cease and desist from undertaking the activity of investment advisory services, including the activity of acting and representing through any media (physical or digital) as an investment advisor, directly or indirectly, till further orders. d. Banks, including Axis Bank, ICICI Bank and HDFC Bank, wherein Fingravy is holding bank accounts, are directed not 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. Ravind....