SEBI bans unauthorized Right Target Advisory Services, IA Regulations

SEBI bans unauthorized Right Target Advisory Services, IA Regulations

The regulatory body of the Securities and Exchange Board of India (SEBI) has put a bar over the advisory service of the Tamil Nadu firm for providing trading tips to the investors that are unauthorized in nature.

In this case, SEBI received an anonymous complaint against Right Target Advisory Service (firm) which is a partnership firm, and its partners are M Ashok Kumar, D Murugan and D Saravanan, having their office in Tamil Nadu. The complainant alleged that the firm is providing advisory services that are unauthorized in nature as it has not obtained registration from SEBI.

In the preliminary examination, SEBI found that the firm is not registered with it in the capacity of an Investment Adviser or any other capacity. It further stated that the firm has acted as an investment adviser for consideration. The firm had bank accounts in City Union Bank, Bank of Baroda, ICICI Bank Ltd. And Axis Bank Ltd., where multiple credits had been made from different sources.

To ensure that the investors who receive investment advice are protected, it is imperative that any person carrying out investment advisory activities has to necessarily obtain registration from SEBI and conduct its activities by the provisions of SEBI Regulations, 2013 (Investment Advisor Regulations).The Right Target Advisory Services had collected approximately Rs. 44 lakhs from its investors and their act is illegal as the registration of the investment advisory with SEBI is a mandate according to IA Regulations.

Allowing the investors to receive an investment advisory service from an unregistered entity, is similar to receiving advice from an unqualified person without following the safeguards mentioned in the IA Regulations. An unregistered investment adviser has not satisfied the Regulator that he is a fit and proper person to hold the certificate of registration as an investment adviser.

Exposing investors to such service also has the effect of interfering with the development of the securities market, as a victim of such services tends to lose faith in the securities market. Such an injury/detriment to the development of the securities market also qualifies as an "irreparable injury". The objective of SEBI, as enshrined in the SEBI Act, is not only the protection of investors but also orderly development of securities market.

It was concluded that the firm was wrongfully inducing the investors to invest in their advisory services related to investment advice and related tips without holding the required certification.

Further, it was also found from the material available on record that the website of the firm is acting as on date that includes the details of the firm such as the email and telephone number can lure the investors into availing the firm's services. This act of the firm, prima facie, shows that the partners of the firm are determined in continuing the unregistered investment advisory activities.

For considering the interests of the existing clients of the firm and other investors, SEBI barred the firm from providing any unauthorized advice to the investors, bypassing an order of cease and desist against the partners of the firm. Instructions were given for immediate withdrawal and removal of all advertisements related to advisory services. It prohibited the partners from diverting any funds of the firm without prior permission of SEBI.