Illegal Investment Advisory: SEBI Bars Madhav Tiwari of Divinecommodity for 2 Years, Asks to Refund Rs1.70 Crore To Investors

Moneylife Digital Team 23 September 2024

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has barred Madhav Tiwari (noticee), proprietor of Divinecommodity.co, for two years for providing unregistered investment advisory services. While imposing a fine of Rs6 lakh, SEBI also asked Mr Tiwari to refund Rs1.70 crore collected as fees from clients, investors, or complainants as fees or consideration or in any other form, in respect to the unregistered investment advisory activities.

In an order, G Ramar, chief general manager (CGM) of SEBI, says, "I note that Mr Tiwari by assuring guaranteed returns with respect to his investment advisory related plans, without obtaining the necessary certificate of registration as an investment adviser and knowingly publishing false and misleading information, has used non-genuine, deceptive means like engaging in business created thereby defraud potential investors by inducing them to invest in the shares based on the advice promising guaranteed returns, which, I find are in violation of the provisions of Regulation 3(a),(b), (c) & (d),4(2)(k) and4 (2)(s) of the PFUTP Regulations of the SEBI Act"

SEBI's investigation was triggered by a complaint received in August 2021 following a referral from the Multi Commodity Exchange of India Ltd (MCX). The initial inquiry revealed that Mr Tiwari was offering investment advisory services without a valid SEBI registration.

According to SEBI's investigation, Mr Tiwari promoted commodity investment tips through his website, Divinecommodity.co, which promised high returns on investments in both Indian and international markets. It was discovered that Mr Tiwari was charging clients for these services through ICICI Bank accounts associated with his firm.

Further website scrutiny revealed that Mr Tiwari was advertising various services, including crude oil, natural gas and bullion tips, claiming an accuracy rate of 99%. Some of his advisory packages were priced as high as Rs1.30 lakh per month.

Despite repeated requests from SEBI for details about his business operations and the amount of money he had collected from clients, Mr Tiwari failed to provide adequate responses, raising further suspicions. His website also became inaccessible during the investigation, but archived versions revealed the extent of the services he was offering.

SEBI's examination of Mr Tiwari's financial records uncovered numerous transactions that matched the price denominations advertised on his website. Bank accounts linked to Mr Tiwari were found to have received substantial credits, consistent with fees charged for his advisory services, confirming that he was conducting unregistered investment advisory activities.

Although Mr Tiwari admitted to collecting only Rs9.66 lakh over several financial years, SEBI's investigation revealed much more significant sums in his bank accounts, Rs72 lakh and Rs98 lakh, casting doubt on his claims. His failure to provide supporting documents, such as bank statements, further weakened his defence.

In addition to investment advisory services, Mr Tiwari claimed to be involved in other ventures, such as numerology and religious ceremonies. However, SEBI's investigation focused on his unregistered investment advisory services, where he admitted ignorance of regulatory requirements. Despite his defence, SEBI concluded that he had misled investors with false promises of guaranteed returns.

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