SEBI Bars 9 Entities From Securities Market For Flouting Investment Advisory Rules

The regulator restricted the entities from the market for at least 2 years and instructed them to refund Rs 8 crore garnered from investors via unregistered investment advisory services, in 3 months. 

Further, the regulator levied a penalty of Rs 18 lakh on the entities and gave them a timeline of 45 days to pay the fine

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The Securities and Exchange Board of India (SEBI) barred nine entities from the securities market and imposed penalties for flouting investment advisory rules. The markets regulator restricted the entities from the market for at least two years and instructed them to refund Rs 8 crore garnered from investors via unregistered investment advisory services, in three months. 

Further, the regulator levied a penalty of Rs 18 lakh on the entities and gave them a timeline of 45 days to pay the fine, reported PTI. The nine entities barred by the regulator are Yogesh Kukadia, Rajesh R Kallidumbil, Nithin Raj, Signal2Noise Capital Partners, Investo Investment Advisers, SS Info Sales, SI Digi Sales, CT Web Sales, and ML Tele Sales. 

The markets regulator restrained Kukadia, Kallidumbil, and Raj from associating as directors or managerial personnel with any listed company for at least two years. In its regulator, Sebi noted that Yogesh and Rajesh didn’t conduct the investment advisory (IA) activities in their individual capacities, but rather conducted them via six partnership firms that weren't registered with the regulator. Notably, both individuals were registered as investment advisers. 

As such, Sebi undertook an inspection of both the individuals’ advisory activities for the April 2018 to September 2019 period after getting some complaints. According to the order, the entities got Rs 810.24 lakh from the clients in fees for their unregistered investment advisory activities. The fees were collected from 4,536 clients for giving investment advice via the six partnership firms, which weren't registered with the regulator. 

All three individuals were common partners at the six firms and collected fees from the clients via these firms, which weren’t registered and therefore, not eligible to collect such fees. “These activities were being carried out by the noticees 1 to 9 without obtaining the necessary certificate of registration as investment advisers and therefore, the noticees have violated ... SEBI Act along with... IA Regulations,” the regulator noted in its order passed on Tuesday. 

As such, Sebi urged the entities ‘to jointly and severally refund the amount/fees/consideration received from any complainant/investor/client, within a period of three months ... in respect of their unregistered investment advisory activities’.

Additionally, the entities have been debarred from accessing the securities market in any way and are restrained from engaging in any buying, selling, or dealing activity for two years or till the expiry of two years from the date of ‘completion of refunds to complainants/investors...whichever is later’.