TaxTMI 
TaxTMI 
2025 (6) TMI 1892
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....ereinafter referred to as 'IA Regulations') and Circulars and Guidelines framed thereunder. 3. The summary of contraventions alleged to have been committed by the Noticee and the corresponding provisions of SEBI Regulations and SEBI Circulars are given in the table below : Table 1 S. No. Alleged violations Regulatory provisions 1 Employees of the IA were not in compliance with the qualification requirements. Regulation 15 (13) read with Regulation 7 of IA Regulations and Clause 1, 2 and 8 of Code of Conduct for Investment Advisers as specified under Third Schedule read with Regulation 15(9) of IA Regulations. 2 Failure to maintain records and call recordings. Regulation 19(1) and 19(2), and Clause1, 2, 8 and 9 of Code of Conduct for Investment Advisers as specified under the Third Schedule read with Regulation 15(9) of IA Regulations, Clause 2(ii) and 2(vi) of SEBI Circular Ref No. SEBI/HO/IMD/DF1/CIR/P/2020/182 dated September 23, 2020 ('2020 Circular') and Regulation 16 and 17 of IA Regulations. 3 Similar Products sold for the Concurrent Period Regulations 3 (d), 4 (1) and 4 (2) (s) of SEBI (Prohibition of Fraudulent and Unfair Trade Prac....
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....ection, a Designated Authority (hereinafter referred to as "DA") was appointed to inquire into and to submit a report pertaining to the aforesaid allegations. The DA issued a show-cause notice dated March 18, 2024 (hereinafter referred to as "SCN") to the Noticee under Regulation 25(1) of the Intermediaries Regulations to show cause as to why appropriate recommendation should not be made against it in terms of Regulation 26 of the Intermediaries Regulations. The Noticee was advised to submit his reply, if any, within 21 days of receipt of the notice. 5. In response to the allegations mentioned in Table 1 above, the Noticee, vide his letter dated May 02, 2024 submitted a reply to the SCN. Pursuant to the receipt of the said reply, an opportunity of personal hearing was granted to the Noticee by the DA on May 13, 2024, which was availed by the Noticee through an authorized representative. Further, the Noticee filed his additional submissions vide letter dated May 30, 2024. The Noticee requested for another opportunity of personal hearing in the matter, which was granted by the DA, and availed by him on June 5, 2024. Thereafter, the Noticee filed his further submissions/ documents ....
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....gulation 15 (13) read with Regulation 7 of IA Regulations and Clause 1, 2 and 8 of Code of Conduct for Investment Advisers as specified under Third Schedule read with Regulation 15(9) of IA Regulations. 12. The aforesaid provisions mandate that an investment adviser and persons associated with investment advice shall have, at all times, a certification from NISM. Further, an investment adviser shall also act honestly, fairly, with due skill, care and diligence in the best interests of his clients and in the integrity of the market and shall comply with all applicable regulatory requirements. 13. During the course of proceedings before the DA, the Noticee, vide email dated June 6, 2024, submitted the evidence of certificates as regards three individuals, namely, Mr. Ankit Vyas (Noticee himself), Mr. Gaurav Pathak, and Mr. Shubham Shrivastava. However, I note from the material available on record that the Noticee has failed to submit the evidence as regards the following individuals (except in respect of 2 instances mentioned in the table below) - Table 2 S. No. Name of the Employee NISM-Series-X- A: Investment Adviser (Level 1) NISM-Series-X-B: Investment Advise....
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....oticee provided the client master data for FY 2020-21 and 2021-22 wherein the fee for the services provided to the clients was mentioned. However, the duration of service for any client was not provided by the Noticee. Further, vide letter dated September 20, 2022 (submitted during inspection) Noticee submitted that "...I do not have any data before March 12, 2022 as all data got erased due to hard disk failure. Further, data in Client relationship Module (CRM) is not available prior to July 01, 2022 and so we could not extract Client Master from CRM...". 19. The Noticee was also advised to submit records of investment advice provided, written or oral, and also the rationale for arriving at such investment advice, duly signed and dated. However, vide letter dated September 21, 2022 (submitted during inspection) the Noticee submitted that he did not have any document showing basis/ rationale for providing tips/ investment advice and he had never maintained any such document. 20. The Noticee was further advised to submit the investment advisory agreements entered between the Noticee and the clients, in terms of Paragraph 2(ii) of the 2020 Circular and regulation 19(1) of the IA....
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....estment Advisers as specified under the Third Schedule read with Regulation 15(9) of IA Regulations and Clause 2(ii) and 2(vi) of the 2020 Circular and Regulation 16 and 17 of IA Regulations. C. Similar products sold for concurrent period : 25. It has been alleged that the Noticee sold similar products for a concurrent period to his clients. Noticee allegedly sold the same product to his clients, within a short span of time, and for overlapping services, durations and also sold the same service multiple times to the same clients. In view of the same, the Noticee allegedly defrauded his clients in order to maximize his revenue generation at the expense of his clients in violation of Clauses 1 and 2 of Code of Conduct as specified in Schedule III of Regulation 15(9) read with Regulation 15(1) of IA Regulations. 26. In the present set of facts, I note that the Noticee provided overlapping services to the following two clients : Name of Investor Service Name Invoice Date Start Date End Date Fees (in Rs. ) Puroshottam Mahobia Evergreen Combo New 06/12/2019 11/08/2020 02/11/2020 20,000 Puroshottam Mahobia Evergreen Combo New 26/11/201....
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....Regulation 15(9) of IA Regulations. 30. During the course of inspection, while going through the email communications exchanged between the clients and the Noticee i.e., Mr. Ankit Vyas, it was observed that fees was also being received in an ICICI Bank Account. The Noticee was accordingly advised to explain the same and vide letter dated September 21, 2022, the Noticee submitted as under; "...I hereby submit that other than my bank account with HDFC Bank and Axis Bank Ltd (which are mentioned on website), I also used to accept fees in my ICICI Bank Account (a/c num- 657005529877). Further, it may be noted that my mobile num- 8223888886 is linked to my aforementioned ICICI Bank account number on Google pay..." 31. In response to the PIQ, the Noticee submitted Client master for FY 20-21 and FY 21-22 wherein fee received from only HDFC Bank and Axis Bank Ltd was mentioned. Accordingly, the Client Master submitted by the IA in response to PIQ was incomplete as it did not contain details of clients who had deposited fees in the ICICI Bank Account and therefore, the inspection team inferred that the IA had submitted false information to the inspection team. 32. In this ....
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....aforesaid provisions, the Noticee ought to have not provided free trial for any products/services to prospective clients. I note from the material available on record that the Noticee was offering free trial to his clients in his onboarding emails. A sample of such an instance is noted as under: "...Monetary Solution investment adviser offers 2 days Free Trial and evaluation for our clients to ensure that our products and services will meet their needs before they pay for a subscription. By accepting and taking advantage of the free trial and making a payment for the subscription..." 37. It is noted that similar approach was adopted by the Noticee in respect of the other clients also and the Noticee in his response before the DA, did not dispute the same. The Noticee submitted before the DA that it had maintained a standard format of emails to deal with clients and no free trials were provided to the clients pursuant to issuance of the aforesaid SEBI Circular. However, as noted by the DA, the Noticee has failed to take any effort to remove the aforesaid standard paragraph and has not made any submissions as regard rectification of the same. In view of the above, I find ....
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.... advice is given. The Noticee, in the present case, has failed to uphold the spirit with which RPFs are to be prepared and has therefore violated Regulation 16 (d) (i) and (ii) of IA Regulations and Clauses 1, 2 and 8 of the Code of Conduct for IA as specified under Third Schedule read with Regulation 15 (9) of the IA Regulations. G. Conducting operations from an unregistered office : 43. The Noticee has further been alleged to have conducted his operations from address not registered with SEBI which was in violation of Regulation 13(b) of IA Regulations and Clause 1, 8 and 9 of Code of Conduct for Investment Advisers as specified under Third Schedule read with Regulation 15(9) of IA Regulations. 44. I note from the material available on record that the registered office of the Noticee is at "2nd Floor 63-64 Gali No 1 Kailash Marg, Daliya Bhakal Malharganj, INDORE, MADHYA PRADESH, 452001". However, during inspection, it was found that the Noticee was operating through a branch located in Udaipur. The same was observed from documents such as salary sheets for employees of Monetary Solutions (Udaipur Branch) and list of interested candidates willing to re-join the Udaipur br....
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.... I agree with the observations of the DA that the Noticee has not disclosed the investor charter on his website and has not provided the link to lodge complaints on SCORES. Therefore, the Noticee is in violation of Paragraphs 2 and 4 of the 2021 Circular and Clauses 8 and 9 of Code of Conduct for Investment Advisers as specified under Third Schedule read with regulation 15(9) of the IA Regulations. I. Fake Reviews about Monetary Solutions through the Website: 50. During the course of inspection, it was further observed that the website of the Noticee had fake positive testimonials from the clients. The same was allegedly in violation of Regulations 3(d), 4(1) and 4(2)(k) of the PFUTP Regulations read with Section 12A(c) of the SEBI Act as well as Clause 1 and 2 of the Code of Conduct as mentioned in Schedule III read with Regulation 15(9) of the IA Regulations. 51. The essence of the aforesaid provisions is that no person shall directly or indirectly 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 and disseminating information which the disseminator k....