SEBI had inspected Alliance Research where Mr Hasan was registered as an IA from 16 April 2015. The inspection found several regulatory lapses, following which SEBI passed an interim order in January 2021 restraining Hasan from accessing the securities market and acting as an IA. These directions were confirmed in July 2022.
One of the key findings was that Mr Hasan had carried out investment advisory activities before obtaining SEBI registration. According to the order, Alliance Research had received advisory fees of ₹6.72 lakh between 16 January 2015 and 16 April 2015, when its registration was obtained. Mr Hasan had also admitted providing unregistered advisory services before registration. SEBI held that subsequent registration could not cure the earlier violation.
SEBI also found deficiencies in KYC, risk profiling and suitability assessment. In a sample of 46 clients examined during the inspection, Alliance Research failed to provide KYC, risk-profiling and suitability-assessment records for 14 clients. Mr Hasan admitted during the inspection that these clients had been provided services without completing the required processes. SEBI rejected his subsequent claim that the records could not be produced because of the stressful atmosphere during the inspection.
The regulator further found that Alliance Research recommended high-risk products to clients categorised as having low or medium risk appetites. SEBI said an IA cannot disregard a client's documented risk profile on the ground that the client is an experienced trader or has been informed about the risks. A shorter holding period also does not make a high-risk product suitable for a low- or medium-risk client.
Another serious lapse involved collecting advisory fees before completing risk profiling. SEBI found that advisory fees had been received before the risk profile was assessed and communicated for 31 of the 46 sample clients. Mr Hasan argued that the first subscription charge was collected before risk profiling so that the profiling would not be done for free. SEBI rejected the explanation, holding that risk profiling is a mandatory prerequisite before a client subscribes to investment advisory services.
The order also flagged the fees charged by Alliance Research. For 19 of the 32 clients for whom records were available, the fees received were higher than the client’s annual income, while for 17 clients the fees exceeded the proposed investment amount disclosed in their risk-profiling forms. SEBI held that even though specific fee limits were prescribed only later, an IA was always required to act in the client's best interests and charge fees that were fair and reasonable.
SEBI also found that Mr Hasan had failed to communicate risk profiles to clients and had not maintained adequate records for certain clients. The regulator concluded that the majority of the allegations in the show-cause notice stood established, including unregistered advisory activity, improper KYC and risk profiling, unsuitable products, advisory services sold before risk profiling, non-communication of risk profiles, unfair fees, non-disclosure of material changes, failure to conduct internal and statutory audits, and employing an individual against whom a SEBI market prohibition was in force.
However, SEBI did not sustain every allegation. The charge that Alliance Research had guaranteed assured returns to clients was not established because the call recording relied upon by SEBI lacked forensic verification and independent corroboration linking the conversation to Hasan or his employees.
Similarly, the allegation concerning qualification and certification requirements for the broader employee base was not established because the material on record did not show that those employees were actually providing investment advice.
While deciding the penalty, SEBI took into account the regulatory action already faced by Mr Hasan. His IA registration had been cancelled in July 2026 in separate summary proceedings for non-payment of renewal fees, while an earlier adjudication proceeding had resulted in a ₹6 lakh penalty and a two-month suspension. SEBI also noted that Mr Hasan had already remained debarred from accessing the securities market since January 2021 under the interim order.
Applying the principle of proportionality, SEBI decided that the minimum monetary penalty was sufficient in the present proceedings and that no additional directions under Sections 11(1), 11(4) and 11B(1) were necessary. Accordingly, Hasan was fined ₹6 lakh.
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