SEBI examined Shares Bazaar’s activities between 16 March 2021 and 16 December 2022, following a reference from the National Stock Exchange of India (NSE). The company was registered as a research analyst and subsequently obtained registrations as a stockbroker and an alternative investment fund (AIF).
According to SEBI, the MMFF scheme represented investors’ principal as secure and offered fixed returns of up to 48%, effectively presenting the arrangement as portfolio management services (PMS). Bank records showed substantial financial activity, including around ₹72.66 crore in credit entries and ₹72.41 crore in debit entries in one ICICI Bank account.
The regulator also found that investor funds were allegedly used to make payments to earlier investors, pay dividends and referral amounts and transfer money to Kisaan Parivar Pvt Ltd (KPPL), a group entity associated with director Bhupal Nanavath. SEBI found that ₹13.81 crore was transferred from Shares Bazaar to KPPL, while ₹3.35 crore moved in the opposite direction.
SEBI also found that PMS-related content remained on the company’s website even after the regulator issued an advisory in March 2022. Bank statements showed that Shares Bazaar continued to raise funds under the MMFF scheme until at least 16 December 2022.
Shares Bazaar claimed that the MMFF programme was developed by former CEO Mr Ramesh without board approval and that the funds were raised through privately placed compulsorily convertible debentures. It also said the PMS-related website content had been inadvertently hosted on a live server. SEBI rejected these explanations, noting that supporting documents were insufficient and that some documents submitted by the noticees fell outside the examination period.
SEBI examined investor agreements and found plans offering fixed returns of 18%, 30% and 48% per annum, along with 100% capital protection. The regulator said there was no evidence that investor funds were actually invested in the securities market. It also noted transactions carrying narrations such as ‘PMS’, ‘Dividend’ and ‘Referral’ and said repeated referral payments indicated an MLM-type strategy to attract additional investors.
The regulator held that Shares Bazaar’s activities went beyond its research analyst registration and violated the provisions of the SEBI (Research Analysts) Regulations, 2014, and the SEBI (Intermediaries) Regulations, 2008. It also held the concerned directors and senior management responsible for their respective roles.
While determining the penalty, SEBI said the exact unfair gain could not be quantified because funds were commingled and routed between Shares Bazaar and KPPL. However, the company had mobilised more than ₹72.66 crore. SEBI also considered earlier regulatory action, including restrictions imposed on Shares Bazaar AIF in February 2024 and cancellation of its stock-broker registration in July 2024.
SEBI imposed a ₹10 lakh penalty on Shares Bazaar, ₹3 lakh each on Mr Nanavath, Ms Atluri and former CEO Mr Ramesh, and ₹1 lakh on current CEO Mr Mitta.
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