Securities Exchange Board of India (SEBI): Madhabi Puri Bach, Whole Time Member, while affirming ex-parte ad Interim Order on not finding any justifiable reason to revoke or modify the directions against the Noticee held her liable for various provisions of the SEBI Act, the IA Regulations and the PFUTP Regulations.
In the instant matter Meeshika Vishwakarma, Proprietor, Sai Proficient Research Advisory (Noticee) was a registered Investment Adviser (IA). It was alleged that IA was taking hefty fees from clients by guaranteeing assured returns, huge loss was incurred by clients due to inappropriate advice given by Sai Proficient, pressurizing the clients to buy multiple products and pay more amount, etc.
The allegations against the Noticee were:
- had offered expected/sure profits to its clients and violated provisions of SEBI (Investment Advisers) Regulations,
- did not resolve investor grievances as per prescribed timelines and did not cooperate with SEBI for inspection.
- had also triggered violation of the Code of Conduct for Investment Advisers
Keeping in view the allegations, an interim order was passed against Sai Proficient and the proprietor for violation of SEBI Act 1992 (hereinafter referred to as SEBI Act), IA Regulation and SEBI (PFUTP) Regulations (hereinafter referred to as PFUTP Regulations).
The Tribunal while affirming the order stated,
“Since there is prima facie violation of securities laws, there is a further urgent requirement that investors be insulated from the undesirable effects of further breach of securities laws and the code of conduct of the IA. Further, the Interim Order has been passed in order to maintain the status quo, so that on final adjudication after granting fair opportunity of hearing on merits, if the liability to repay is established, the possible direction in the final order does not become infructuous. Therefore, based on the facts and circumstance of the case, I find that the balance of convenience is not in favour of the Noticee. In view of the above, the request of the Noticee to consider allowing to continue rendering services as IA cannot be considered as this stage”.
The Tribunal made interesting remarks while addressing to the facts and the behaviour of the Noticee prior and during and subsequent to the inquiry. It was of the opinion,
“…It is interesting to observe that if the suspicious employees wanted to misrepresent and deceive the amount/fees from the client/complainant should probably have been received in the suspicious employees account rather than Noticee’s bank account which invariably is the beneficiary. Further, I also note that the Noticee has also not provided any documentary evidence making any clarification or warning or disclaimer in this respect to either to employees or to the clients/investors”.
While addressing the submissions of the Noticee it stated,
“Considering the dynamics of the market, the returns from the investment in the market are unpredictable, no matter how much and for how long the investment is made. Any information that puts out for the consumption of its existing and prospective clients has to be done with great responsibility and should be of such nature that it enables investors to take reasoned and unbiased decisions regarding their investment This act of the IA is nothing but prima facie appears to be an attempt to induce the client to subscribe to its advisory service by showing projected and expected return/profit, which prima facie is an act to mislead the client as full disclosure is not made by the IA that the proposed investment of the client may incur loss. This act prima facie, appears to have done with an intention to bring in more customers and thereby increasing the income of the IA”.
[Sai Proficient Research Investment Advisory, In re., WTM/MB/WRO/WRO/13178/2021-22, decided on 27-08-2021]
Agatha Shukla, Editorial Assistant has reported this brief.