Illegal Investment Advisory: SEBI Asks Fraud Advisor To Refund Rs. 27.67 Lakh To Investors

Pandey was found to have offered investment advice and promised assured returns without holding the necessary SEBI registration. The market regulator's probe into his operations revealed significant regulatory infractions.

The investigation commenced after SEBI received a complaint on March 10, 2023 alleging that Pandey was engaged in online fraud. The complainant reported having invested Rs. 2 lakh in August 2022 enticed by a membership plan promising guaranteed returns. However, the promised returns never materialized.

SEBI's examination of Pandey's Know-Your-Customer (KYC) documents, bank statements, and communication records uncovered that he was offering investment advisory services without the required registration. The review identified various transactions in Pandey's bank accounts that were linked to his advisory activities. Pandey's Kotak Mahindra Bank account alone showed Rs. 32.77 lakh in credits between April 7, 2019, and March 2, 2023, with approximately Rs. 27.67 lakh attributed to unregistered advisory services.

Further Pandey's online presence revealed a Facebook profile under the name "Snigdha Equity Advisory Cash," which listed his contact details and advertised advisory services. Additional evidence from WhatsApp chats indicated that Pandey offered various investment plans including intraday calls and long-term memberships, with fees ranging from Rs. 75 to Rs. 25,000. These communications included assurances of high accuracy and returns on investments.

According to the Securities and Exchange Board of India (SEBI) Act, 1992, Section 12(1), any person acting as an investment adviser is required to be registered with SEBI. This regulation ensures that individuals providing investment advice are properly vetted and adhere to regulatory standards.

Further, Sections 11(1), 11(4), 11(4A), 11B(1), 11B(2), and 11D grant SEBI the authority to issue directives to enforce compliance with the Act's provisions including those related to the conduct of market participants and the integrity of investment advisory services.

Pandey was prohibited from selling assets, properties, mutual funds, shares, and securities held in both dematerialized and physical forms, except to facilitate refunds to defrauded clients. Additionally, Pandey was barred from conducting any investment advisory activities in the securities market, directly or indirectly until he obtains the requisite SEBI registration.