Anugrah Stock and Broking's Registration Cancelled by SEBI
Moneylife Digital Team 29 March 2023
Market regulator Securities and Exchange Board of India (SEBI) has cancelled the registration certificate of Anugrah Stock and Broking Pvt Ltd (Anugrah/ ASBPL) for indulging in unregistered portfolio management services (PMS) activities, failing to maintain proper books of accounts and records and misutilising its clients’ funds and securities. Investors have lost over Rs1,200 crore in Anugrah which was running an illegal portfolio management scheme that the National Stock Exchange (NSE) failed to catch and was instead felicitating the broker for a sharp increase in turnover .
 
In an order, SK Mohanty, whole-time member (WTM) of SEBI, says, "Anugrah has not only failed to fulfil its avowed duty towards its clients, be it indulging in unregistered portfolio management services (PMS) activities, failure to maintain proper books of accounts and records but has gone to the extent of misutilising its clients' funds and securities."
 
"I note that the designated authority (DA) has recommended that the certificate of registration of Anugrah may be cancelled. Having considered the allegations and material available on record, I find no reason to disagree with the recommendation given by the DA, rather I am of the firm view that considering the facts and circumstances of the case, the ends of justice demands that in the instant matter, Anugrah does not deserve to continue as a registered intermediary," the WTM says.
 
Since November 2020, Anugrah has been expelled by Bombay Stock Exchange (BSE), NSE and Metropolitan Stock Exchange of India Ltd (MSEI). 
 
In its 30 April 2021 report, the DA observed that Anugrah offered derivatives advisory services (DAS) to its clients directly and also through its associate Om Sri Sai Investments (OSSI) which was like offering PMS. 
 
The DA also observed a shortfall of funds and securities of Anugrah clients, payments made to clients having running debit balances, management information system (MIS) statements of debtors and creditors, MIS statement of client ledgers available with the clients, and multiple discrepancies in the data management and reporting.
 
Based on the DA report, SEBI issued a show-cause notice (SCN) to Anugrah. However, nobody appeared from Anugrah for the scheduled hearing. 
 
From April 2019 to February 2020, Anugrah received Rs165.10 crore from 677 clients. Out of these 677 clients appearing in the DAS MIS excel file, 627 clients appeared in the client master of Anugrah. On further review of the clients' ledgers for each of these clients and bank books, it is noted that out of Rs165.10 crore collected, Rs69.26 crore was traced in the books of Anugrah, and Rs44.90 crore has been received in the books of accounts of OSSI. Thus, in total, more than Rs114 crore was found to have been received in the accounts of Anugrah and OSSI.
 
Mr Mohanty from SEBI observed that Anugrah used to enter into a contract with its clients to offer its services as a stock broker and, at the same time, it was also collecting funds from them under two of its plans, gold and platinum plans that were being promoted to the clients under its DAS where Anugrah was assuring a return of minimum 12%pa (per annum) to the clients. "In a nutshell, Anugrah, pursuant to a contract, was undertaking on behalf of its clients, the management of funds of its clients so as to give them a minimum assured return of 12%pa. The same is nothing else but providing PMS under the garb of stock broker-client relationship."
 
The market regulator also found that Anugrah was making payments to certain clients when, in fact, it had to recover funds from these clients due to the debit balances in their ledgers, as maintained in the books of accounts of Anugrah.
 
"In order to make payments to these clients, Anugrah has utilised the funds lying with it that belonged to other clients, thereby suggesting misuse of funds apparently belonging to the clients having credit balances with it. Thus, it becomes apparent that the payments made to such debit balance clients were predominantly arising from some contractual agreement between Anugrah and these clients and possibly such contractual obligations arising out of the DAS with assured return scheme because of which it had to make such pay-outs to such debit balance clients despite these clients having debit balances in their trading accounts with the stock broker," SEBI order says. 
 
In February this year, the economic offences wing (EOW) of Amravati police in Maharashtra filed a charge-sheet against Anugrah, its proprietor Paresh Kariya, Anil Gandhi, proprietor of Teji Mandi Analytics Pvt Ltd (TMAPL), NSE, Vikram Limaye, former managing director and chief executive officer (MD&CEO) of NSE, Priya Subbaraman, the chief regulatory officer of NSE, Edelweiss Custodian Services and Central Depository Services Ltd (CDSL). 
 
The charge-sheet is based on a first information report (FIR) filed by Rishabh Rajesh Sikchi from Amravati. The FIR registered on 28 July 2022 claims that these entities "with a common intention deceived and caused a wrongful loss of Rs18.56 crore" to Mr Sikchi and 77 other investors. Mr Sikchi, a partner in Rainbow Financial Services, claims he suffered a loss of about Rs15.02 lakh in this matter. He filed a complaint on 26 September 2021.  
 
The FIR states 78 investors lost Rs18.56 crore in the Anugrah stock broking scam. 
 
According to the charge-sheet, Paresh Mulji Karia has been in judicial custody since 21 December 2022, while Anil Gopal Gandhi is absconding.
 
Mr Limaye and Ms Subbaraman have filed a plea before the Bombay HC for clubbing the cases together. However, the HC has not yet passed any order, the charge-sheet filed by the Amravati EOW says.
 
SEBI passed an order against the crisis-hit Anugrah Stock and Broking only in November 2020, even though it had conducted a joint inspection of the broker in 2018 itself. (Read: Amravati EOW Files Charge-sheet against Anugrah Stock & Broking, Tejimandi, NSE & Its Top Executives, Edelweiss and CDSL)
 
On 9 March 2021, SEBI imposed a penalty of Rs90 lakh on ASBPL for repeated violations of regulations and compliance. The order mentions an inspection carried out by a team comprising officials from SEBI, NSE, BSE and CDSL. At the time of inspection, the market regulator was aware of the over Rs100 crore shortfall in the account of ASBPL. 
 
On 4 September 2020, NSE had withdrawn all trading rights of the crisis-hit ASBPL. Earlier on 1st September, the stock exchange had withdrawn ASBPL's trading rights in futures & options (F&O), currency derivatives and commodity derivatives segments.
 
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