SEBI's aim not only investor protection but also orderly securities market development

SEBI's aim not only investor protection but also orderly securities market development

SEBI's preliminary examination found that Gold Crude Research and its sole proprietor Ramnarayan Sharma were not registered with the SEBI in the capacity of an Investment Adviser or in any other capacity

In this case, the Securities and Exchange Board of India (SEBI) received an anonymous complaint from an email id, against Gold Crude Research (which is a sole proprietorship firm of Mr. Ramnarayan Sharma registered under the Madhya Pradesh Shop and Establishment Act, 1958) wherein the complainant, inter alia, alleged that Gold Crude Research was illegally involved in advisory services.

SEBI's preliminary examination found that the firm and its sole proprietor, were not registered with SEBI in the capacity of an Investment Adviser or in any other capacity. The website (earlier as well as current) provided information that the firm provided advisory services in the commodities and forex space. The firm had bank accounts in SBI Bank Ltd., Axis Bank Ltd., ICICI Bank Ltd. and HDFC Bank Ltd. where multiple credits had been made from different sources.

The Whole Time Member of SEBI in this case opined that an investor receiving a service from an unregistered investment advisor vis-à-vis an investor who receives such service from a registered investment adviser in consonance with the SEBI (Investment Advisers) Regulations, 2013 (IA Regulations) stands at a disadvantageous position in respect of his protection as an investor as envisaged under the IA Regulations.

An unregistered investment adviser has not even satisfied the Regulator that he is a fit and proper person to hold the certificate of registration as investment adviser. Availing of service from such persons is detrimental to investors and such unqualified service would result in irreparable damage as the investors' money is invested based on unqualified and un-regulated service.

Exposing investors to such service also has the effect of interfering with the development of the securities market, as victims of such services tend to lose faith in the securities market. Such an injury/detriment to the development of the securities market also qualifies as an "irreparable injury".

It was concluded that Gold Crude Research was soliciting and inducing investors to dealing with the securities market on the basis of investment advice, commodity tips etc., prima facie, without having the requisite registration/certification as mandated under the IA Regulations.

Similarly, the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) (PFUTP Regulations) seeks to curb fraudulent and manipulative activities in the securities market in order to boost investor confidence in the securities market and to provide an environment conducive to increased participation and investment in the securities market which is vital to the growth and development of the economy.

Further, it was also noted from the material available on record, that the website is active as on date and can lure investors to avail the firm services. Furthermore, the very act of the firm to change its URL/website address prima facie, showed that the firm was trying to avoid regulatory detection and was determined in continuing its unregistered investment advisory activities.

Considering the interests of already existing clients of Gold Crude Research and also the interests of those who may fall prey to the unregistered investment advisory by reaching the firm through the website or telephone or email, it has been held that the balance of convenience lies against Gold Crude Research and its Proprietor and requires immediate action against them including not to divert the money collected from the subscribers/clients/investors.