Market regulator Securities and Exchange Board of India (SEBI) seems to take illegal investment advisory firms to the task and is punishing them and their owners and partners. In the latest order, SEBI has asked Capproin Financial Advisory Services and its partners Sourabh Rai and Jasmeet Kaur Bagga to refund Rs75.19 lakh collected from investors and stay away from markets for three years.
In an order, Ashwani Bhatia, a whole-time member (WTM) of SEBI says, "...it is clear that the partners, namely Jasmeet Kaur Bagga and Sourabh Rai are liable for the amount of fees or consideration collected by them as a result of providing unregistered investment advice to clients or investors... I am of the considered view that the noticees' are liable to refund Rs75,19,961 collected as fees..."
The case is related to two complaints received on SEBI Complaints Redress System platform (SCORES). The complainants alleged that they lost their money invested based on advice provided by Capproin Financial Advisory Services. After investigating the complaints, SEBI issued show-cause notices (SCN) to the firm and its two partners.
During the hearing, advocate Manish Gupta representing Mr Rai contended that the SCN issued by SEBI is beyond the period of reasonable limitation. He also claimed that his client ceased to work with the investment advisory in February 2015 and Ms Bagga was responsible for all the activities of Capproin Financial Advisory Services.
On the other hand, Ms Bagga contended that the complaint registered on SCORES was closed in 2015. She also alleged that the firm was run by Mr Rai, and she was just a silent partner.
However, Mr Bhatia from SEBI observed that the partners who have made submissions in response to the allegations in the SCN have not been able to show that the contraventions were committed without their knowledge or that they had exercised all due diligence to prevent the commission of such actions. "That being the case, there is no ground to exclude liability of any of the partners for the contraventions of Capproin Financial Advisory Service."
Both Mr Rai and Ms Bagga further contended that the services offered by them were in the nature of research analyst and not investment advice as Capproin Financial Advisory Services was only giving buy or /sell signals in the financial markets.
However, after perusing the documents and evidence, the WTM of SEBI says Capproin Financial Advisory Service and its partners (noticees) were offering tips relating to shares, bullion, futures and options. "Further, it is also seen that the tips relating to the above–mentioned asset classes were curated into various services or packages, viz. stock future tips, Nifty tips, and MCX commodity tips...the services offered by the noticees were indeed in the nature of investment advice."
During the investigation, the market regulator also discovered that Ms Bagga was also the proprietor of Research InfoTech, a SEBI-registered investment adviser, from 30 October 2015. SEBI also received several complaints against Research InfoTech in 2018, including a complaint which alleged that the entity was offering an assured return of Rs25 lakh on investment of Rs12 lakh. In June 2021, SEBI had barred Ms Bagga from markets for four years.
SEBI then asked Mr Rai and Ms Bagga to refund money collected from investor clients, while barring the partners and Capproin Financial Advisory Service from markets for three years.
