SAT Imposes Rs10 Lakh Cost on SEBI for Failing To Investigate Investor Complaints against Stockbroker in Goa
Moneylife Digital Team 28 August 2023
Coming down heavily on the Securities and Exchange Board of India (SEBI) for disposing of a complaint summarily without carrying out an investigation, the Securities Appellate Tribunal (SAT) imposed Rs10 lakh cost on the market regulator. SAT also directed SEBI to register the investor complaints and conduct a detailed investigation within three months.
In an order last month, the SAT bench of Justice Tarun Agarwala (presiding officer) and Meera Swarup (technical member) says, "We set aside the impugned communication dated 17 March 2021 and 11 June 2021 of SEBI and dated 24 September 2021 of National Stock Exchange (NSE) and direct SEBI to register the complaints of the appellants and conduct a detailed investigation preferably within a period of three months after giving an opportunity of hearing to the investors. We also impose a cost of Rs10 lakh on SEBI for failing to investigate the complaints of investors against the trading member despite the order of this Tribunal dated 20 January 2021."
SAT directed SEBI to hold a detailed investigation into complaints made by the investors on the SCORES platform, alleging that Ventura Securities Ltd (VSL), the stockbroker with whom they had invested their precious savings, promised good returns on their investments, but subsequently did not redeem the investments. 
The investors from Goa had challenged the communication issued by SEBI, disposing of their complaints, holding that they were not registered with the stockbroker and their money was invested with the broker's representative, who assured them of fixed returns.
The investors alleged that they invested large sums of money from their precious savings (Rs5.85 crore by the Pinto group and Rs2.40 crore by D'Silva group) from May 2016 to October 2018 in a fixed-income scheme with a return of 2% per month (for Pinto group) and index option scheme with a stop loss of 4% (for D'Silva group) with VSL, a registered stockbroker with NSE, through Ameet Savant After an initial lock-in period, the schemes had an open option of redemption.
Initially, both investor groups received various amounts as returns against their investment; however, once they made redemption requests, their investments were not redeemed. They filed multiple complaints with SEBI and NSE. They also filed a commercial summary suit in the Bombay High Court (HC). 
However, SEBI and NSE closed their complaints, saying that these investors were not registered with the stockbroker (VSL) and invested money with Mr Savant, who is being investigated by SEBI and the economic offences wing (EOW) of Goa police. Further, SEBI says the investors have already filed the commercial summary suits in Bombay HC and since the matter is sub-judice, the complaints were treated as closed.
When the matter reached SAT on 20 January 2021, it directed SEBI to reconsider the investors' complaint and decide the same as per the law. "The appellants have alleged that the monies given to Mr Savant eventually came into the accounts of VSL. This fact also required to be investigated. The mere fact that Mr Savant is separately being investigated by SEBI is not sufficient. These complaints cannot be disposed of in a summary manner," the Tribunal had said in the order.
However, SEBI did not follow the directions and closed the investor complaints. The Tribunal noted that Mr Savant was the authorised person representing VSL in Goa. 
It says, "Despite a clear direction that their complaints cannot be disposed of in a summary manner, the case was disposed off summarily without carrying investigation as to whether Mr Savant received monies from the investors as a proprietary concern or on behalf of VSL or whether monies given to Mr Savant eventually went into accounts of VSL."
In its affidavit in reply to appeal nos390 to 393 of 2021, VSL admitted to having received some of the monies of the investors through its representative Mr Savant. NSE, vide its letter dated 12 December 2020 to EOW, Goa, has stated that there was non-compliance on the part of VSL. The letter also indicates that not only the six investors but other investors from Goa have also made complaints against VSL and its authorised person Mr Savant, the bench noted.
SAT says, "It appears that both VSL and Mr Savant were indulging in fraudulent and unfair trade practices, which needs to be investigated under the securities laws. The fact that the investors have filed suit for recovery of money has nothing to do with violation of the securities laws."
While directing SEBI to register the investors' complaints and conduct a detailed investigation within three months, the Tribunal imposed a cost of Rs10 lakh on the market regulator.
Kamal Garg
6 months ago
Good move. Regulator being fined.
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