SEBI Slaps Penalty of Rs. 30 lakh on Wealthit Global for Violating Regulatory Norms

SEBI Slaps Penalty of Rs. 30 lakh on Wealthit Global for Violating Regulatory Norms

The Securities and Exchange Board of India (in short SEBI) imposed a penalty of Rs. 30 lakh on Wealthit- noticee Global and its proprietor Mohit Manghnani for violating regulatory norms. Further, the Board prohibited the noticee from dealing in the securities market for a period of five years.

Wealthit Global is registered with SEBI as an Investment Adviser under the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 (hereinafter referred to as the "IA Regulations"), since August 29, 2016.

Several allegations were levelled against the Noticee as per the Show Cause Notice (in short SCN) issued by SEBI. It was alleged that first the noticee, registered investment adviser with SEBI failed to comply with SEBI directions with respect to inspection of the noticee wherein the noticee failed to extend co-operation in the inspection proceedings. Second, the noticee deceived its clients by not disclosing material information and/or misleading its clients. Third, the noticee continued to act as Investment Adviser even after expiry of his National Institute of Securities Market Certification (in short NISM certification) on 1 January, 2019 and in view of the FIR filed against the noticee by Indore Police, the noticee was prima facie alleged not to be 'fit and proper' person as per schedule II of SEBI (Intermediaries Regulations), 2008.

The Board found that the noticee took money and made false promises of assured returns, however it failed to provide services to various complainants, leading it to flouting the Investment Adviser Rules (in short IA). The noticee had failed in its responsibility to act in fiduciary capacity to its clients.

The Board found that the notice had violated the provisions of the Securities and Exchange Board of India Act, 1992 (in short "SEBI Act"), IA Regulations, SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred as "PFUTP Regulations") and circulars issued thereunder.

The regulator also found that the noticee used deceptive devices to defraud its clients by charging exuberant fees and ignored their interests intentionally by making false and misleading statements of assured profits, violating the PFUTP Regulations.

SEBI also noted that the Noticee had not filed Action Taken Report (hereinafter referred as 'ATR') within the timeline prescribed in SEBI Circular dated 18 December, 2014.

From available records SEBI observed that before filing the 33 complaints to SEBI in SEBI Complaints Redress System (hereinafter referred to as SCORES, majority of the complainants had earlier approached Wealthit directly for lodging their grievances. However, none of them received any response from Wealthit. Thus, Wealthit had failed to redress the client grievances.

Through such acts, the notice had failed to comply with the provisions of IA regulations, stated the Board.

The Board directed the noticee to refund an amount of Rs. 7,30,11,826 which the noticee had collected from the investors from 1 April, 2018, within a period of three months from the date of the order.

Further, the Board debarred Wealthit and its proprietor from accessing the securities market, directly or indirectly and was prohibited from buying, selling, or otherwise dealing in the securities market, directly or indirectly in any manner, for a period of five years.

Lastly, the Board imposed a monetary penalty amounting to Rs. thirty lakh on Mr. Mohit Manghnani.