SEBI Cancels Registration of Capvision Investment Advisor ‘Misleading Investors’

SEBI Cancels Registration of Capvision Investment Advisor ‘Misleading Investors’

The Securities Exchange Board of India (SEBI), cancelled the registration of Capvision Investment Advisor for promising assured profit to clients in the securities market and misleading investors.

Capvision Investment Advisor (Noticee), was registered with SEBI as an Investment Adviser in June 2014. It is a partnership firm with partners Ravi Prakash Mishra and Rekha Mishra.

The SEBI after several considerable attempts of serving Show Cause Notice (SCN), no response was received neither any appearance was made by the Noticee, hence, the board proceeded with ex parte proceedings.

The SEBI noted that Partner No. 1- Ravi Prakash Mishra had floated a company in the name of Capvision Investment Advisor Ltd. i.e., CIAL, to undertake investment advisory activities and receive payments from clients without informing SEBI or seeking registration as an Investment Advisers (IA). Further it found that subsequent to the freeze of bank accounts of the Noticee in 2017, as a result of recovery proceedings of SEBI, Partner No. 1, who was the active partner of the Noticee, created two proprietorship firms in collusion with P. Chourasiya who was named as the proprietor of these firms.

The SEBI observed, “such acts were undertaken after the Noticee got registered with SEBI as an IA while the penalty amount imposed vide SEBI order dated 6 October, 2016 remained unpaid. I, therefore, find that Partner No. 1 has clandestinely floated entities with names similar to the registered firm, showing other individuals as the proprietor or directors of such unregistered entities so as to open/operate fresh bank accounts and continue with his IA activity.”

In its order, SEBI found that Capvision was engaged in ‘non-genuine and deceptive activity’ of obtaining payments from clients to third-party bank accounts.

Further, SEBI noted that Capvision had made representations to its clients, promising such assured returns and thus, failed in its responsibility to act in a fiduciary capacity towards its clients. Accordingly, it has violated the code of conduct specified under the Investment Advisers (IA) rules.

The board pursued Regulation 3(a) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations), which prohibits any person from buying, selling or otherwise dealing in securities in a fraudulent manner and Regulation 3(d) of PFUTP Regulations prohibits a person from engaging in any course of business which operates as fraud or deceit upon any person in connection with any dealing in securities.

In this regard, the Chief General Manager Geetha G. of SEBI observed, “promising assured profit in securities market amounts to misrepresentation and misleading the investors. Such reckless conduct intended to induce investors to deal in securities constitutes ‘fraud’ under the PFUTP Regulations. I also find that the Noticee being a registered intermediary has failed to appear in the proceeding and defend the allegation of violation of PFUTP Regulations….Extending the same analogy, I find that the Noticee has violated Regulation 3(a), 3(d), 4(2)(k) and 4(2)(s) of PFUTP Regulations read with Section 12A(c) of SEBI Act, 1992.”

The regulator noted that the entity being a registered intermediary has failed to appear in the proceeding and defend the allegation of violation of PFUTP Regulations.

Earlier, two adjudication orders were passed against Capvision, levying penalties of Rs. 75 lakh and Rs. 8 lakh for flouting IA norms, however, these fines were not paid. Following this, recovery proceedings were initiated by SEBI in 2017 and 2018 and the bank accounts of Capvision were frozen.

Thereafter, Partner No. 1 -- Ravi Prakash Mishra, who was the main proprietor of Capvision, engaged one P Chourasiya to open new bank accounts for receipt of money from the clients of his investment advisory business.

These bank accounts were opened in the name of Chourasiya, who was the proprietor of certain entities with names closely similar to that of Capvision. Payments from clients were also received in another company called Capvision Investment Advisor Ltd. (CIAL), whose original directors included Ravi Prakash Mishra and Rekha Mishra, who were later replaced in 2019 by Chourasiya and others.

The board observed, “this is a fraud, in a larger sense played on the system as a whole, whereby in order to bypass the freezing directions, Partner No. 1 has connived with other individuals to continue with his IA business. I also find that the Noticee has not acted in the best interests of its client and violated the code of conduct and PFUTP Regulations by promising assured profits to its clients.”

Accordingly, the SEBI cancelled, the certificate of registration granted to Capvision Investment Advisor.