TaxTMI 
TaxTMI 
2023 (9) TMI 1715
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Swarup, Technical Member 1. The present appeal has been filed against the order dated January 25, 2023 passed by the Whole Time Member ('WTM' for short) of the Securities and Exchange Board of India ('SEBI' for short) imposing a penalty of Rs. 13 lakh under Section 15C, 15EB, 15HA and 15HB of the SEBI Act, 1992 on Pinnacle Market Investment Advisory Pvt. Ltd. (Appellant no. 1) and Rs. 5 lakh each on Mr. Abhishek Patel (Appellant no. 2), Mr. Shekhar Mishra (Appellant no. 3) and Ms. Parul Sahu (Appellant no. 4), directors of Appellant no. 1. The WTM also issued directions to resolve the complaints pending in SCORES within seven days and to refund any amounts required for resolving the complaints. The Appellants were prohibited from sellin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gulations, 2003 ('PFUTP Regulations' for short). Appellant no. 1 replied to the SCN as well as availed the opportunity of personal hearing. Appellant no. 2 to 4 did not file any reply to the SCN nor did they avail the opportunity of personal hearing. 4. The WTM after considering the material on record, reply of the Appellant no. 1 to the SCN and the submissions made by the Appellant no. 1 during the personal hearing come to the conclusion that the allegations made in the SCN stand proved. 5. We have heard Shri Abhishek Mishra, Company Secretary for the Appellant and Shri Sumit Rai, the learned counsel with Shri Manish Chhangani, Ms. Samreen Fatima, Shri Sumit Yadav and Shri Abhay Chauhan, the learned counsel for the Respondent. 6. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ases fees from clients was received before the completion of risk profiling process. We thus find that the Appellants violated the above stated IA Regulations. However, with regard to violation of Regulations 3(a), (b), (c) and (d) of PFUTP Regulations, we find that the basis of Appellants conducting the risk profiling of its clients in a deceitful and fraudulent manner is not based on any material evidence on record. We note that the website and welcome letter of the applicant carried the warning that investments in securities market is subject to market risk. We note that the WTM noticed only in one case this issue and for just one instance of purported violation the Appellants cannot be held in violation of PFUTP Regulations. 8. Regar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....FUTP Regulations, we find that the charges of fraudulent activities is based on the complaints of the clients and in our opinion such bald allegations need to be investigated further to term them as fraud. 9. With regard to charging fees for services to be rendered in future, we agree with the findings of the WTM that the Appellants were collecting fees from clients much in advance in violation of Clause 1 of the Code of Conduct read with Regulation 15(9) of IA Regulations. 10. Similarly, we find that the Appellants failed to maintain arms-length relationship between their investment advisory services and execution of trade for at least one client in violation of Regulation 15(1), 15(3) and 22(b) of the IA Regulations and Clause 1 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ast, furnished the information required vide the pre- inspection questionnaires. By not doing so, they have shown their intention of not allowing the inspection to take place at all. The violation of Regulations 13(a), 15(12), 25(1) and 25(2) read with Regulation 24(3) and Clauses 8 and 9 of Code of Conduct for IA read with Regulation 15(9) of IA Regulations stands affirmed. 14. The WTM in paragraph 46 to 48 of the impugned order has evaluated the role and liabilities of the directors of the Appellants Company (Appellant nos. 2 to 4) for the deeds of the Company (Appellant no. 1) by virtue of their directorship. We agree that the Company acts through its directors who control the affairs and management of the Company. Therefore, the Dire....