SEBI: Any person carrying out investment advisory activities has to necessarily obtain registration from the markets regulator The Securities and Exchange Board of India (SEBI) has held that in order to protect the interest of investors and to maintain integrity of the securities market, IA Regulations provides that the investors who receive investment advice are protected, it...
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SEBI: Any person carrying out investment advisory activities has to necessarily obtain registration from the markets regulator
The Securities and Exchange Board of India (SEBI) has held that in order to protect the interest of investors and to maintain integrity of the securities market, IA Regulations provides 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 as required under Regulation 3(1) of the IA Regulations, which provides that, "On and from the commencement of these regulations, no person shall act as an investment adviser or hold itself out as an investment adviser unless he has obtained a certificate of registration from the Board under these regulations" and conduct its activities in accordance with the provisions of IA Regulations.
The SEBI directed that Money Plus Research Advisory & Financial Servicesand its sole proprietor Shri Pravin Meshram (Noticees), shall within a period of three monthsfrom the date of this order,refund the money received from the clients/investors, as fees or considerationor in any other form, in respect of their unregistered investment advisory activities.
The proceedings had emanated from an ex-parte ad-interim order and show cause notice passed by Securities and Exchange Board of India (SEBI) as the Noticees were prima-facie found to have been providinginvestment advisory serviceswithout seeking registration from SEBIand also misrepresenting to investors that the Noticees had a certificate of registration for acting as an investment adviser form SEBI. By the interim order, certain directions were issued.
The Adjudicating Officer(AO) observed that Money Plus which is a sole proprietorship firm of Shri Pravin Meshram was engaged in giving advice relating to investing in, purchasing, selling or otherwise dealing in securities or investment products, through its website.
In terms of Regulation 2(l)of Investment Adviser Regulations such an advice is "investment advice". Therefore, the AO found that Money Plus and its proprietor Shri Pravin Meshram were engaged in the business of providing investment advice to public, for consideration and were thus acting as an investment adviser, as defined under Regulation 2(m) of the Investment Adviser Regulations. The Noticees were holding themselves out as a SEBI registered investment adviser, on their website.
Provisions of IA Regulations includes continued minimum professional qualification and net-worth requirement for investment adviser, disclosure of all conflict of interest, prohibition on entering into transactions which are contrary to advice given for 15 days, risk profiling of investors, maintaining documented process for selecting investment for client based on client's objective and risk profile, understanding the nature and risks of products or assets selected for clients, etc.
It was noted that that the Noticee was not registered with SEBI in the capacity of Investment Advisor. Hence, these activities/ representations as being made by the Noticee without holding the certificate of registration as investment adviser was in violation of Section 12(1) of SEBI Act, 1992 read with Regulation 3(1) of the IA Regulations.
It was also observed that the Noticee was not only knowingly concealing the fact that it was not registered with SEBI as an investment advisor but also making a false representation that it was registered with SEBI as Investment Adviser, thereby luring and inducing investors to deal in securities by availing its services.
According to the AO, these misleading representations were deceptive activities of the Noticee and therefore, fraudulent and covered within the definition of "fraud" defined under Regulation 2(1)(c) of the PFUTP Regulations. It was noted that fraudulent activities/ conduct/ act/ practice of the Noticee were in violation of provisions of Section 12A (c) of SEBI Act, 1992 and Regulations 3(d) and Regulations 4(1) and 4(2)(k) of PFUTP Regulations.