sebi:WTM/AB/WRO/WRO/21389/2022-23

SEBI · SEBI · 2022-01-28 · Ananta Barua, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Noticees found in violation of Section 12(1) of SEBI Act, 1992 read with Regulation 3(1) of IA Regulations, 2013; directed to refund Rs. 2.26 Crores received from clients, deposit balance with SEBI, debarred from securities market for six months, and restrained from undertaking investment advisory activities without registration.

Provisions invoked

• s. 19
• s. 12(1)

Regulations

• Reg. 2(1)(l)
• Reg. 3(1)
• Reg. 2(1)(m)

Parties

• M/s. Capital Gains Financial Services
• Rakesh Narwani

Holding

The Noticees were acting as an 'investment adviser' as defined under Regulation 2(1)(m) of the IA Regulations, 2013 by providing investment advice through their website for consideration without obtaining registration from SEBI, and are therefore in violation of Section 12(1) of the SEBI Act, 1992 read with Regulation 3(1) of the IA Regulations, 2013.

Full text

Final Order in the matter of Capital Gains Financial Services Page 2 of 14 2. The SCN sent to the Noticees through Speed Post had returned undelivered. Subsequently, SCN was again sent to the Noticees by enclosing the same with SEBI letter dated January 28, 2022 through Speed Post, which was delivered to the Noticees. The Noticees vide email dated March 14, 2022, submitted their reply dated March 12, 2022 to the SCN. Subsequently, the file was placed before me on March 04, 2022 for granting a hearing date and the Noticees were granted an opportunity of personal hearing on May 24, 2022. The Noticees attended the personal hearing on May 24, 2022 through video conferencing. During the hearing, Shri Rakesh Narwani submitted that he had filed his reply dated March 12, 2022 and that he had nothing more to submit in the matter.

Final Order in the matter of Capital Gains Financial Services Page 3 of 14 was never claimed to be registered with SEBI in any capacity nor was any false claims made to the clients. (e) Clients used to analyse the performance of the firm through Free Trial before taking any subscription and upon getting satisfied completely; they used to take the services. The Noticees had just provided his clients tips in the share market by charging certain amount of fee from them, for which they duly agreed. None of the clients was forced in any manner nor was there undue influence or any coercion was made for taking the advisory services. (f) The Noticees were not involved in any malpractices such as promising assured returns or handling the client's Demat accounts, etc. (g) During the tenure of the business, only two clients had made complaints about which the Noticees were unaware, as the clients had made the complaints directly to the SEBI. Barring couple of clients, none of the other clients had any issues or grievance or had faced any losses. Hence, it is clear that Noticees didn't have any fraudulent intentions. (h) If SEBI would have then informed to the Noticees that they were into wrongdoing and non-compliance activity, they would have closed down the operations at that time only. (i) The Noticees did close down the operations somewhere around in 2018 as soon as he became aware that for doing this business, a license from the SEBI was required. On realization of the mistake, the

Final Order in the matter of Capital Gains Financial Services Page 4 of 14 (l) Throughout the business tenure, the Noticees worked honestly and with integrity towards all the clients and served them to the best of their ability. (m) The Noticees admit the fact that they were involved in activities without obtaining registration from SEBI in accordance with the provisions of SEBI Regulations. However, it was done as a mistake due to no knowledge of SEBI Act and its Regulations. At that time, the Noticees were completely unaware of the SEBI Laws and Regulations. If they would have had knowledge of the SEBI laws, then being the law-abiding citizen, they would have definitely taken the registration from the SEBI. Further, the Noticees were neither intimated by SEBI nor received any communication from SEBI that the registration is required for carrying out such activities. (n) Furthermore, the allegations made in that complaints are completely false. (o) The amount collected by the Noticees is lesser than the amount mentioned in the Notice, as there were several personal deposits, contra entries and inter transfer between bank in the accounts which were not related to the business. (p) The actual receipt of fees from the clients was around Rs. 90 lakhs only. Further, out of the total receipt of fees of around Rs. 90 lakhs, the Noticeea have refunded his clients around Rs.45 lakhs, which can be checked through the details enclosed with the reply. (q) Further, the SCN mentions credi

Source: SecMarx — sebi:WTM/AB/WRO/WRO/21389/2022-23. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.