SEBI bars proprietor of Secure Investor and Investment Advisory in market for Unauthorised Investment Advisory Services case

SEBI bars proprietor of Secure Investor and Investment Advisory in market for Unauthorised Investment Advisory Services case

Securities Exchange Board of India (in short SEBI) barred Manish Lalwani (hereinafter referred to as noticee), proprietor of Secure Investor and Investment Advisory barred from the securities markets for three years for providing unauthorised investment advisory services and directed him to refund investor's money within three months.

The proceedings emanated from three separate complaints as received by SEBI on the SEBI Complaints Redress System (in short SCORES). The complainant had alleged that he had not received any invoice or advisory services from the Noticee despite having paid an amount of Rs. 11,64,000 to the Noticee.

As per the Show Cause Notice (in short SCN), the Noticee was alleged to have held himself out as an 'Investment Adviser' without obtaining registration from SEBI in violation of the provisions of Section 12(1) of the Securities Exchange Board of India Act, 1992 (in short SEBI Act), read with Regulation 3(1) of the Investment Advisers Regulations.

In the instant proceedings, the amount of fees /consideration collected by the Noticee was as a result of providing unregistered 'Investment Advice' to investors, amounted to Rs. 41,74,870.82.

The Board found that the Noticee collected funds by providing unregistered investment advice to investors through his proprietary firm Capital Yield Research and Advisory from December 2015 to September 2016. Thereafter, he mobilized capital through his proprietary firm Secure Investor Investment Advisory between August 2016 and July 2017.

In his reply, the Noticee contended that the amounts collected were lesser than the amount mentioned in the SCN as there were several personal deposits in the accounts, which were not related to the business as is also borne out from the Income Tax Return and there was no reference to the debit entries which also included the expenses incurred while running a business such as employee salaries, rental cost for office premises, etc.

The Board discussed the provisions related Investment Advisers Regulations, Regulation 3 of the Investment Advisers Regulations – Application for grant of certificate. The Bord stated that the definition as given in Regulation 2(m) of the Investment Advisers Regulations states that 'Investment Adviser' shall mean "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."

The Board was not inclined to accept the Noticee's submission since the amounts collected by him were through investment advisory activities without SEBI registration and could not have been utilized for any purpose other than refunding such amounts back to the clients. Further, the Income Tax Return submitted by the Noticee to substantiate the income earned from business pertained to the Assessment Year 2016–17, which was prior to the unregistered investment activities carried out by him i.e., Financial Year 2015–16.

SEBI noted that the Noticee was liable to refund Rs. 21.34 lakh and Rs. 31.75 lakh as proprietors of Capital Yield Research and Advisory and Secure Investor Investment Advisory, respectively.

In its order, the Securities and Exchange Board of India (SEBI) directed Noticee to refund within three months the money received from investors as fees in respect of his unregistered investment advisory activities.

"He has been prohibited from accessing as well as dealing in the securities market directly or indirectly in any manner for a period of three years from the date of this order or till the expiry of three years from the date of completion of refunds to investors... whichever is later," SEBI ruled.

In addition, the Board restrained him from selling its properties, securities, and mutual fund holdings except for the sole purpose of making the refunds.