TaxTMI 
TaxTMI 
2023 (3) TMI 1404
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....resulting in their suffering monetary losses. 2. SEBI forwarded a copy of the aforementioned complaint of Pramod Kumar to the Special Task Force, Madhya Pradesh Police, vide letter dated October 15, 2018. Simultaneously, SEBI conducted an examination in the matter and thereafter, issued a Show Cause Notice dated February 1, 2021 ("SCN") against the Noticees, based on findings contained in the examination report, inter alia alleging that: (i) IIFS, Anant Rathore, Vijesh Joshi and Nyn Investment Financial Services Pvt. Ltd. (a company having as its Directors, Anant Rathore and Vijesh Joshi) ("NYN/Noticee no. 2") (hereinafter collectively referred to as "Noticees") carried out investment advisory activities and held themselves out as 'Investment Advisers' without obtaining a Certificate of Registration from SEBI in violation of the provisions of Section 12(1) of the SEBI Act, 1992 ("SEBI Act") read with Regulation 3(1) of SEBI (Investment Advisers) Regulations, 2013 ("Investment Advisers Regulations"). (ii) The Noticees, by providing advisory for investment in securities without obtaining a Certificate of Registration from SEBI, were in violation of Sectio....
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..... The adjournment request made by Noticee 4 was accepted and the matter was adjourned to June 28, 2022. On the said date, Advocate Vinay Puranik made oral submissions on behalf of Noticee 4. Subsequently, Noticee No. 4 filed additional written submissions vide letter dated July 4, 2022. 6. Subsequently, vide e-mail dated December 21, 2022, Noticee 3 informed SEBI that he had not received the SCN and the Hearing Notice sent by SEBI and requested that an opportunity of personal hearing be provided to him. Accordingly, an opportunity of personal hearing was provided to Noticee 3 on January 23, 2023. Prior to the hearing, Noticee 3 made written submissions dated January 20, 2023. Noticee 3 was represented by Abhishek Mishra, Company Secretary, for the hearing, and the authorized representative made submissions along the lines of his reply dated January 20, 2023. The authorized representative also submitted that the Noticee did not have access to the statements of the bank accounts mentioned in the SCN, and if the same were provided, he would be in a position to explain the nature of the transactions reflected therein. The copies of the bank statements were furnished to the Noticee v....
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....lients. i. The Noticee accepted that he was involved in offering services without obtaining SEBI registration. He had also taken steps to refund all the money collected from clients. j. In respect of the bank accounts which were mentioned in the SCN, the Noticee submitted as under: - * Payments were received from clients in the account (37464722651) maintained with SBI and account (917020054767417) maintained with Axis Bank. The PayUMoney account was only linked with these two bank accounts. * The bank accounts in the name of Padmini Concept Trading Pvt. Ltd., mentioned in the SCN, was used by Noticee 4 for his personal family business, and the Noticee was not aware of the transactions happening in this account. * The Kotak Mahindra Bank account mentioned in the SCN belonged to his mother, and payments related to advisory services were never received in the said bank account. Similarly, the Bank of Maharashtra account mentioned in the SCN was the personal account of the Noticee and client funds were never received in this account. k. He no longer has access to the said back accounts and requested that the statements of the above....
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.... also submitted a declaration dated 1.09.2018, that was executed in favour of IIFS by Pradeep Gurjar, a relative of Pramod Kumar, declaring that, as both the parties have entered into a settlement, no grievance remains against IIFS. i. It was submitted that the complainant Sreekanth Panchangam, received his complete payment of Rs.17,22,369 via RTGS on June 22, 2021, from the account of IIFS. A copy of the document evidencing payment was submitted. j. A declaration dated 16.01.2019 was executed in favour of IIFS by Ayan Raichaudhuri, declaring that he received the entire amount of Rs.2,30,000 and, further, that he did not have any grievance left against IIFS, was submitted by the Noticee. k. It was therefore submitted that out of the four complainants referred in the SCN, the claims of 3 complainants were settled. l. The Noticee also submitted that he has no objection if the claim of the remaining one complainant, Jackie Bhatia, for an amount of Rs.1,31,300 is settled or repaid through the funds from the account of IIFS (Axis Bank A/c No. 917020054767417, Bombay Hospital Square Branch, Indore.) which was frozen by Cyber Crime Police. FINDINGS: ....
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....pplication for grant of certificate. 3.(1) 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:" 10. From the material available on record, it is noted that two websites of Noticee 1 i.e. www.investmentindia.co and www.investmentindia.net.in (this website is no longer active; however, archived pages of the website were downloaded from web.archive.org), had displayed IIFS as a SEBI registered investment adviser. I also note that the said websites offered advisory services in sixteen products, viz. Stock Future Power, Stock Option Power, Stock Cash Power, Blue Chip Tips, MCX Gold Option Tips, Nifty Option Tips, Stock Cash BTST Tips, Inventory Calls, Stock Cash, Stock Future, Stock Option, Energy Tips, Base Metals, NCDEX, Smart MCX and Bullion, against consideration. 11. As per the information available on the website, www.investmentindia.net.in, it is observed that seven bank accounts were mentioned for transferring funds for availing the services that were being offered. The details of said ....
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....oney had submitted that during the period September 20, 2017, to September 11, 2018, a sum of Rs. 1,47,78,364 was credited to the said Axis Bank account by various clients through the gateway. In view of the above, I have no hesitation in holding that Noticee 1 was engaged in the act of providing investment advisory services against consideration. 13. I note that Noticee 4 submitted a document signed by Noticee 3, the authenticity of which is disputed by Noticee 3, purporting to absolve him from all the liabilities in relation to the activities undertaken by Noticee 1. Noticee 3, on the other hand, has repeatedly stated in his reply that the entire operations of Noticee 1 was being run by Noticee 4. Having considered the replies, I note that what is not in dispute is that Noticee 3 and 4 were the only partners of Noticee 1 during the period under examination. I, however, note that other than these claims, Noticees 3 and 4 have failed to submit any valid proof regarding dissolution of the partnership firm during this period and in the absence of the same, I note that they would be jointly and severally liable for the actions of Noticee 1. 14. In respect of Noticee 2, which, I ....
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....e sources of these funds. Considering the aforesaid, I find that all such sums were nothing but consideration received by Noticee 1 from investors /clients in lieu of 'Investment Advice' offered through subscription to its investment advisory services. 18. Regulation 2(m) of the Investment Advisers Regulations defines the term 'Investment Adviser' as "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, Regulation 2(l) of the Investment Advisers Regulations 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." The aforementioned definitions, when viewed in light of the observations contained in the preceding paragraphs, lead me to conclude that the Noticees (exclu....
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.... Regulation 2(1)(c) of the PFUTP Regulations: "fraud" includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person with his connivance or by his agent while dealing in securities in order to induce another person or his agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss, and shall also include-- (1) a knowing misrepresentation of the truth or concealment of material fact in order that another person may act to his detriment; (2) a suggestion as to a fact which is not true by one who does not believe it to be true; (3) an active concealment of a fact by a person having knowledge or belief of the fact; (4) a promise made without any intention of performing it; (5) a representation made in a reckless and careless manner whether it be true or false; (6) any such act or omission as any other law specifically declares to be fraudulent; (7) deceptive behaviour by a person depriving another of informed consent or full participation; (8) a false statement made without reasonable ground fo....
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.... Act should not be issued against them. In the instant proceedings, the amount of fees /consideration collected by Noticee 1 as a result of providing unregistered 'Investment Advice' to investors amounted to Rs.2,96,84,143 (see Table 2 at page 9 and paragraph 17). I note that Noticee 3 has sought to contend that his liability for making refunds should be limited to 50% of the total funds mobilised because the profits of the firm were divided equally between both the partners. I am, however, unable to accept this contention. IIFS is a partnership firm and the partners would be jointly and severally liable for the actions of Noticee 1. This would extend to the refund obligations of Noticee 1 also. 23. Given the above, I am of the considered view that the Noticees 1, 3 and 4 are jointly and severally liable to refund the aforementioned amount collected in lieu of offering unregistered investment advisory services to its clients /investors. Directing Noticees 1, 3 and 4 to refund such amount will be in the interest of investors in the securities market. 24. In their replies, Noticees 3 and 4 have stated that they have made refunds to some of their clients. They have also ....
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....ir advantage, wherever quantifiable, made as a result of the default; (b) the amount of loss caused to an investor or group of investors as a result of the default; (c) the repetitive nature of the default. Explanation. -- For the removal of doubts, it is clarified that the power to adjudge the quantum of penalty under sections 15A to 15E, clauses (b) and (c) of section 15F, 15G, 15H and 15HA shall be and shall always be deemed to have been exercised under the provisions of this section." 28. In this regard, I find that the SCN does not mention the amount of disproportionate gain or unfair advantage made as a result of the default or the amount of loss caused to an investor or group of investors. However, as stated in Table 2, I find that an amount of Rs.2,96,84,143 was credited to the accounts held in the name of Noticee 1 in relation to offering investment advisory services. In view of the same, I am of the considered view that imposition of minimum penalty is warranted in the instant proceedings, which would be commensurate with the violation committed by Noticees 3 and 4, who were the partners of Noticee 1. ORDER: 29. In view of the foregoing....
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.... in an escrow account for a period of one year for distribution to clients / investors who were availing the investment advisory services from the Noticees. Thereafter, the remaining amount, if any, shall be deposited in the Investors Protection and Education Fund, maintained by SEBI. (f) Noticees 1, 3 and 4 are restrained from selling their assets, properties and holding of mutual funds /shares /securities held by them in demat and physical form except for the sole purpose of making the refunds /depositing balance amount with SEBI, as directed above. Further, the banks are directed to allow debits only for the purpose of making refunds to the Complainants /investors /clients who were availing the unregistered investment advisory services from the Noticees, as directed in this Order, from the bank accounts of the Noticees. (g) Noticees 1, 3 and 4 are debarred from accessing the securities market, directly or indirectly, and are prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in any manner whatsoever, for a period of 3 (three) years from the date of this Order or till the expiry of 3 (three) years from the date ....