Coming down heavily on a proprietor of a registered investment advisory firm, Securities and Exchange Board of India (SEBI), has barred him from markets for five years, while imposing a penalty of Rs35 lakh. SEBI also asked Tarun Chandani, proprietor Indore-based Flanking Research and Investment Advisor to refund within six months money collected from investors for providing fixed guaranteed returns from markets. Interestingly, in November 2020, the Madhya Pradesh High Court (HC) has declared Mr Chandani as absconder.
Since he failed to accept SEBI's show-cause notice (SCN) and appear for personal hearing twice, the market regulator issued the order
ex-parte. In the
order issues on 30 November 2022, Geetha G, chief general manager (CGM) of SEBI says, "...since performance or return on investments in securities cannot be predicted and is subject to market risk, this act of providing fixed guaranteed returns from securities market is, prima facie, fraudulent and appears to have been done with the intention to bring in more customers and thereby increasing the income of Mr Chandani."
The SCN also alleged that Mr Chandani was falsely assuring returns to investors knowing fully well that all investments in stocks, derivatives, and commodity derivatives in respect of which it was offering investment advice are subject to market risk.
"Mr Chandani has, however, acted in a fraudulent manner while dealing with clients as the risk profiling and suitability assessment of clients were done with the motive of enhancing his income and not with a view to actually assess the risk-taking ability of the clients. This, in turn, led to wrong products being sold to the wrong category of clients," Ms Geetha says in her order.
The CGM of SEBI also noted that considerable attempts have been made to serve the notice to Mr Chandani and he was granted two hearing opportunities as well. "Despite the same, no response or appearance has been made by the Mr Chandani."
Earlier, during an inspection carried out by the market regulator, Mr Chandani did not submit documents to the inspecting authority including client master data under which the list of clients, the services provided to them, the duration of service, the fees collected, the know-your-customer (KYC) and risk profiling forms. Details of client fee collected year-wise and scheme and product-wise were also not submitted by him.
While SEBI's inspection was going on, it found the office of Flanking Research and Investment Advisor sealed by MP police based on a first information report (FIR) filed by some investors. In the FIR, investors alleged that around 114 employees were providing share market tips to clients without having necessary qualifications, adequate knowledge and proper guidance. These employees were also assuming different names while speaking with clients as per instruction from their employer and by promising unrealistic returns, the employees were cheating clients, the FIR says.
The contents of the FIR also include that Mr Chandani was not present in the office premises at the time of the visit by the police. It also states that the office premises were sealed and Alok Kumar, who was present in the office premises, was taken into custody.
