FRAUD OF MISREPRESENTION AS INVESTMENT ADVISER – Eshwars
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FRAUD OF MISREPRESENTION AS INVESTMENT ADVISER

Authored by Aishwarya Lakshmi V.M

In the matter of: Money Booster – Proprietor Mr. Anurag Singh

Noticees: Money Booster & Anurag Singh.

Date of the Final order: 22.04.2021

Provisions invoked

(a) Section 12(1)[i] of the Securities Exchange Board of India Act, 1992.

(b) Regulation 4(2)(k)[ii] of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Regulation 3(1)[iii] of SEBI (Investment Adviser) Regulations, 2013.

Facts of the case:

1. SEBI received various complaints against Noticee 1 inter alia raising allegations such as –

a) Forcing to pay more money in the name of demat account opening.

b) Giving false commitments relating to trading.

c) Not providing any service for the money given.

The Noticees without receiving the payments through gateways such as Bhartipay had received the amounts directly in their bank accounts.

2. The Complainants provided WhatsApp conversation screenshots, bank details to which they had transferred their money, email ID, phone number etc. Based on the available information it was understood that Noticee 2 was the proprietor of Noticee 1. A google search of the website moneybooster.in shows that Noticee 1 advertised itself as one of the leading financial service provider and investment advisory company in India.

3. However, the SEBI Registration ID of the Noticee 1 belonged to another entity having the same name and whose proprietor coincidentally shared the same name as that of Noticee 2. While the Noticee 2 projected himself to be residing at Indore, the original SEBI registered Investment Advisor’s proprietor was situated at Gurgaon.

4. The Noticees were holding themselves out as Investment Advisors, when in reality they did not possess any certificate of registration under the Investment Advisor Regulations, 2013.

Interim Order of the AO:

The Noticees had knowingly misrepresented to the investors by showing / advertising the SEBI registration number of some other SEBI registered Investment Advisor. The Noticees had also promised sure shot profits and had actively concealed that investment in the securities market is subject to market risks. Hence, the AO found the Noticees liable for violating the securities laws.

Issue:

Whether the Noticees are liable for appropriate directions, under the SEBI Act, 1992, as proposed in the interim order?

Decision of the WTM:

1. The WTM upheld the interim order of the AO and held that the Noticees who had promised to give assured returns violated the circular of SEBI providing the regulations for Investment Advisers.

2. Also the Noticees had voluntarily disseminated information or advice through media, knowing it to be false and misleading and which is designed or likely to influence the decision of the investors while dealing with securities. Hence, the WTM observed that the Noticees had violated the PFUTP Regulations, 2003.

3. The Noticees held themselves out as investment advisors when in reality they were not. Hence, they had violated the SEBI Act, 1992 and the SEBI (Investment Advisers) Regulations, 2013.

4. SEBI while upholding the Interim AO Order, inter alia directed the Noticees

a) to refund the amount to the investors,

b) to issue public notice regarding the modalities for refund,

c) to file a completion report with SEBI,

d) as debarred from accessing securities markets for a period of 2 years,

e) as debarred from associating themselves with any company associated with SEBI for a period of 2 years,

Regulatory issues that are to be noted from this decision of WTM:

1.Client of an investment advisor ought to carry out due diligence before paying money to the said investment advisor. SEBI has hosted the list of registered Investment Advisors in its website at:

https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=13 and the same may be checked.

2. Further, an Investment Adviser who gives advisory services to their clients for consideration ought to get themselves registered with SEBI, lest it will tantamount to violation of the SEBI (Investment Adviser) Regulations, 2013.

[i] Section 12, Regulation of stockbrokers, sub-brokers, share transfer agents: 2. (1) No stockbroker, sub-broker, share transfer agent, banker to an issue, trustee of a trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market shall buy, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the 53[regulations] made under this Act.

[ii] Regulation 4, Prohibition of manipulative, fraudulent and unfair trade practices: (2)(k) Dealing in securities shall be deemed to be a manipulative fraudulent or an unfair trade practice if it involves disseminating information or advice through any media, whether physical or digital, which the disseminator knows to be false or misleading and which is designed or likely to influence the decision of investors dealing in securities.

[iii] Regulation 3, Application for Grant of Certificate: (1) On and from the commencement of these regulations, no person shall act as an investment adviser or hold itself out as an investment adviser unless he has obtained a certificate of registration from the Board under these regulations.

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