SEBI’s surprise onsite inspection, which began on 5 March 2024, found violations of the SEBI (Investment Advisers) Regulations, 2013 and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. The matter was subsequently examined through enquiry proceedings, with the designated authority (DA) finding that Trade Nexa Research had misled clients by assuring them of fixed returns and had failed to comply with regulatory requirements.
One of the key findings related to the collection of fees. SEBI found 90 instances in which the adviser either charged fees without a properly executed agreement or collected fees before an agreement was executed. Of these, 74 instances involved agreements that were either not properly signed or were not provided, while in another 15 cases, fees were collected before execution of the agreement. In one case, the adviser charged fees and provided investment advice without entering into an agreement.
The DA noted that several agreements contained only the adviser’s signature, while the client’s signature was missing. It held that an agreement has to be executed by both parties. Trade Nexa Research argued that some clients had confirmed agreements via email rather than by physical signature, and that services were not provided prior to execution. SEBI did not accept this explanation.
SEBI also found that the adviser had failed to maintain the required records of interactions and call recordings with clients and prospective clients. Trade Nexa Research admitted that complete call records were not maintained, arguing that most communication occurred via email and SMS. SEBI held that the availability of email or SMS records could not substitute for the mandatory maintenance of interaction records.
Another violation concerned a free trial offered to a prospective client. According to the order, a WhatsApp exchange showed a client asking about the trial period, to which the adviser responded that a one-day trial would be provided. An investment recommendation was subsequently made on the same day, while payment was collected a few days later. SEBI concluded that this violated the prohibition on investment advisers offering free trials of their products or services.
The most serious finding concerned assurances of returns and recovery of losses. During the inspection, SEBI examined call recordings in which the adviser allegedly made specific statements about profits. In one recording, the adviser stated that she would generate profits for the client. Another conversation referred to generating ₹10,000 on the same day and recovering ₹5,000-₹7,000 daily.
Other recordings referred to monthly returns of ₹30,000-₹40,000 under a basic service and ₹80,000-₹90,000 under a premium service, besides daily profits of ₹2,000-₹3,000. Another conversation referred to making profits and recovering losses.
Trade Nexa Research argued that it had not guaranteed returns and that its communications contained risk disclaimers warning clients that their capital was at risk. It also claimed that statements about recovering losses were not promises of guaranteed returns. SEBI, however, distinguished these disclaimers from actual client conversations.
The regulator observed that the call recordings contained promises of specific or fixed returns and could not be treated merely as marketing statements. SEBI concluded that such assurances could mislead or induce clients in a manner likely to influence their investment decisions and amounted to mis-selling of investment advisory services.
The adviser also challenged SEBI’s reliance on the call recordings and referred to an earlier order in the matter of Star World Research. SEBI rejected the argument, noting that the recordings in the present case had themselves been forwarded to the inspection team by Trade Nexa Research.
SEBI ultimately held that Trade Nexa Research had violated provisions of the PFUTP Regulations, including Regulations 3(a) to 3(d), 4(1) and 4(2)(k), (o) and (s),of the SEBI Act. The regulator also found violations of the Code of Conduct for Investment Advisers.
The order notes that SEBI had earlier imposed a ₹7 lakh monetary penalty on Trade Nexa Research through an adjudication order dated 13 August 2025 for the same set of violations. The adviser failed to provide confirmation that the penalty had been paid within the stipulated time, after which SEBI initiated recovery proceedings by issuing a notice of attachment dated 23 December 2025.
Trade Nexa Research argued that another action for the same violations would amount to double jeopardy. SEBI rejected the contention, stating that enquiry and adjudication proceedings are separate and independent. It also held that directions under Section 12(3) of the SEBI Act can be issued even where a monetary penalty has already been imposed.
Although the DA recommended regulatory censure, SEBI concluded that censure alone would not be sufficient given the circumstances.
Accordingly, in its final order, SEBI has prohibited Trade Nexa Research Investment Adviser from taking new clients for one month.
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