Interim Order in the matter of Dezire Research (Proprietor Mr. Nishant Chopra)

WTM/MPB/IMD/WRO/173/2021

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: MADHABI PURI BUCH, WHOLE TIME MEMBER INTERIM EX PARTE ORDER Under Sections 11, 11(4), 11B (1) and 11D of the Securities and Exchange Board of India Act, 1992 and Regulation 35 of SEBI (Intermediaries) Regulations, 2008.

In Re: Violation of provisions of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 and Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 In respect of:

Sr. No. Name of the Entities PAN

1 Mr. Nishant Chopra, Proprietor Dezire Research AGXPC3196L

1. Mr. Nishant Chopra, Proprietor Dezire Research (“Dezire Research”) is registered as an Investment Adviser (“IA”) under the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 (hereinafter referred to as the “IA Regulations”) with effect from February 04, 2016 under SEBI registration number INA000004104. Dezire Research is a proprietorship firm and its proprietor is Mr. Nishant Chopra. The registered office of Dezire Research is at ‘501, 5th Floor, B Block Metro Tower, Scheme No. 54, Vijay Nagar Indore-452010, Madhya Pradesh’. Its website address is http://www.dezireresearch.com.

2. SEBI conducted an inspection in relation to the affairs of Dezire Research during March 2019 at the registered address of Dezire Research to ascertain possible violation, if any,

Interim Order in the matter of Dezire Research of the provisions of SEBI Act, 1992 (hereinafter referred to as “SEBI Act”) and rules and regulations made thereunder.

3. During the inspection, documents/information pertaining to KYC, Risk Profiling, Risk Profiling acceptance by client, Change in risk profiling, Client Master, Invoices, SMS logs, employees list, Compliance audit report, NISM certification etc., were sought on test check basis. The inspection of Dezire Research was conducted on random sampling basis and analysis of such samples & related records on test checking basis as well as written/oral submissions of Dezire Research, it’s employees and clients. Based on inspection / examination of documents / information provided by Dezire Research, SEBI prima facie found that Dezire Research, proprietor Mr.Nishant Chopra;

3.1 had not carried out risk profiling and suitability assessment of client as per the provision of SEBI (Investment Advisers) Regulations, 2013 (hereinafter referred to as “IA Regulations”); 3.2 had not charged fair and reasonable fee from clients as per the provision of IA Regulation; 3.3 has also triggered the Code of Conduct for Investment Advisers by virtue of above activities.

Dezire Research, proprietor Mr.Nishant Chopra had prima facie violated the provision of IA Regulations read with clauses of Code of Conduct for Investment Advisors and SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”)

4. I have perused the materials available on record regarding risk profiling and suitability assessment of client and fee charged / received from clients. In this context, prima facie, the following issues arise for determination: 4.1 Issue No. 1: Whether Dezire Research has, prima facie, violated any provisions of IA Regulations? 4.2 Issue No. 2: Whether Dezire Research has, prima facie, violated any provisions of SEBI Act read with PFUTP Regulations? 4.3 Issue No. 3: If the answers to Issue No. 1 or 2 is in the affirmative, who is responsible for the violations? Interim Order in the matter of Dezire Research

4.4 Issue No. 4: If the answers to Issue no. 1 or 2 is in the affirmative, whether urgent directions, if any, should be issued against those responsible for the violations?

5. Before moving forward, it is appropriate to refer to the relevant provisions of SEBI Act, IA Regulations and PFUTP Regulations: IA REGULATIONS:

Regulation 15(1) An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise. Regulation 15(9) An investment adviser shall abide by Code of Conduct as specified in Third Schedule:

THIRD SCHEDULE Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 [See sub-regulation (9) of regulation 15]

CODE OF CONDUCT FOR INVESTMENT ADVISER

1. Honesty and fairness: An investment adviser shall act honestly, fairly and in the best interests of its clients and in the integrity of the market.

2. Diligence: An investment adviser shall act with due skill, care and diligence in the best interests of its clients and shall ensure that its advice is offered after thorough analysis and taking into account available alternatives. 4. Information about clients: An investment adviser shall seek from its clients, information about their financial situation, investment experience and investment objectives relevant to the services to be provided and maintain confidentiality of such information. 5. Information to its clients: An investment adviser shall make adequate disclosures of relevant material information while dealing with its clients. 6. Fair and reasonable charges An investment adviser advising a client may charge fees, subject to any ceiling as may be specified by the Board, if any. The investment adviser shall ensure that fees charged to the clients is fair and reasonable. 8. Compliance: An investment adviser including its representative(s) shall comply with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of clients and the integrity of the market.

Interim Order in the matter of Dezire Research

Regulation 16: Risk profiling: Investment adviser shall ensure that: (a) it obtains from the client, such information as is necessary for the purpose of giving investment advice, including (i) age; (ii) investment objectives including time for which they wish to stay invested, the purposes of the investment; (iii) income details; (iv) existing investments/ assets; (v) risk appetite/ tolerance; (vi) liability/borrowing details. (b) it has a process for assessing the risk a client is willing and able to take, including: (i) assessing a client’s capacity for absorbing loss; (ii) identifying whether client is unwilling or unable to accept the risk of loss of capital; (iii) appropriately interpreting client responses to questions and not attributing inappropriate weight to certain answers. (d) any questions or description in any questionnaires used to establish the risk a client is willing and able to take are fair, clear and not misleading, and should ensure that: (i) questionnaire is not vague or use double negatives or in a complex language that the client may not understand; (ii) questionnaire is not structured in a way that it contains leading questions. (e) risk profile of the client is communicated to the client after risk assessment is done;

Regulation 17 Suitability: Investment adviser shall ensure that,- (a) All investments on which investment advice is provided is appropriate to the risk profile of the client; (b) It has a documented process for selecting investments based on client’s investment objectives and financial situation; (c) It understands the nature and risks of products or assets selected for clients; (d) It has a reasonable basis for believing that a recommendation or transaction entered into: (i) meets the client’s investment objectives; (ii) is such that the client is able to bear any related investment risks consistent with its investment objectives and risk tolerance; (iii) is such that the client has the necessary experience and knowledge to understand the risks involved in the transaction. (e) Whenever a recommendation is given to a client to purchase of a particular complex financial product, such recommendation or advice is based upon a reasonable assessment that the structure and risk reward profile of financial product is consistent with clients experience, knowledge, investment objectives, risk appetite and capacity for absorbing loss

Interim Order in the matter of Dezire Research

SEBI Act, 1992 “Section 12A. No person shall directly or indirectly— (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder; (b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognised stock exchange; (c) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognized stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder;”

PFUTP REGULATIONS Regulation 2(1)(c): “(c) “fraud” includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person with his connivance or by his agent while dealing in securities in order to induce another person or his agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss, and shall also include— (1) a knowing misrepresentation of the truth or concealment of material fact in order that another person may act to his detriment; (2) a suggestion as to a fact which is not true by one who does not believe it to be true; (3) an active concealment of a fact by a person having knowledge or belief of the fact; (4) a promise made without any intention of performing it; (5) a representation made in a reckless and careless manner whether it be true or false; (6) any such act or omission as any other law specifically declares to be fraudulent, (7) deceptive behaviour by a person depriving another of informed consent or full participation, (8) a false statement made without reasonable ground for believing it to be true.

Interim Order in the matter of Dezire Research (9) the act of an issuer of securities giving out misinformation that affects the market price of the security, resulting in investors being effectively misled even though they did not rely on the statement itself or anything derived from it other than the market price. And “fraudulent” shall be construed accordingly …”

Regulation 3. No person shall directly or indirectly— (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under.

ISSUE No. 1: Whether Dezire has, prima facie, violated any provisions of IA Regulations?

6. Risk Profiling and Suitability Assessment:

6.1 Risk Profiling and non-communication of risk profile to clients: 6.1.1 As per Regulation 16 (a) and 16(b) of IA Regulations, IA is required to obtain information about the client which includes age, investment objective, income details, existing investments, risk appetite, liabilities, etc. for the purpose of determination and quantification of risk appetite of the client. As per Regulation 16(e) of IA Regulations, the IA is under obligation to communicate the risk profile of the client after risk assessment is done.

6.1.2 During the inspection, on sample basis, Risk profile of 47 clients and proof of communication of risk profile for such clients were sought from Dezire Research. It is noted that out of 47 clients, only in 10 cases Dezire Research was able to submit proof for communication of risk profile to the clients. There was no evidence for the Interim Order in the matter of Dezire Research remaining 37 clients. In the absence of proof of communication to clients, I am of the view that such clients have no understanding of the risk profile done by Dezire Research for themselves. The risk profiling of the client is a crucial process. The investment advice sent to the clients need to be appropriate to the risk profile of the client. Since all the information for carrying out risk profiling are obtained through telephone conversation, it is all the more important to send the risk profile statement to clients and clients should be given a fair amount of time to revert or raise objection in case of any disagreement with the risk profiling statement. Regulation 16 (e) of IA Regulation provides that risk profile of the client shall be communicated to the client after risk assessment is done. From the sample, it is noted that in majority of the cases, the IA has not communicated risk profile to the clients. Therefore, it is prima facie found that out of 47 sample clients, Dezire Research has not communicated risk profile for 37 clients and it had sold the products to its clients without following due procedure mandated under IA Regulations.

6.1.3 Thus, from the above it is prima facie found that Dezire Research has not communicated risk profile score for 37 clients and it had sold the products to those clients without following due procedure mandated under IA Regulations. Thereby, Dezire Research has not acted with honesty, fairness and in the best interest of its clients. In view of the same, Dezire Research has prima facie (a) failed to comply with regulation 16 (e) of IA Regulations; and (b) failed to abide by clauses 1 and 5 of Code of Conduct of Schedule III read with Regulation 15(9) of IA Regulations. Thus, Dezire Research has prima facie violated the provision of Regulation 16 (e) and clauses 1 and 5 of Code of Conduct as mentioned in Schedule III read with regulation 15(9) of IA Regulations.

6.2 Advisory Services Offered Prior to communication of Risk Profiling:

6.2.1 As per regulation 17 of IA Regulations, the IA has to ensure that all investments on which investment advice is provided is appropriate to the risk profile of the client. During the inspection, from the analysis of the cases where risk profile has been sent to the clients, it is noted that prior to communicating the risk profile, the Interim Order in the matter of Dezire Research investment advisory services have already started. Also, before the communication of risk profiling, the IA charged huge amount as fees from certain clients. 6.2.2 The details of timelines for 10 sample cases are as under: S.No. Client name Date on which risk Amount charged profile is forwarded to Date of first before the the client payment as per the communication client master of risk profile to the client (Rs.) 01 Vikash kumar Singh June 20, 2018 June 07, 2018 71,613 02 Kali Charan March 09, 2018 Nov 21, 2017 4,73,000 Savita Meena / 03 Hajarilal Meena March 28, 2018 March 21,2018 48,000 Gajendra Kumar May 05, 2018 04 Singh May 08, 2018 5,000 05 Subrat Sahoo July 19, 2018 July 16, 2018 14,025 06 Jatinder Singh July 17, 2018 July 12, 2018 50,000 07 Mahesh Waman December 07, 2017 October 17, 2017 1,66,805 08 Umed chand July 29, 2018 July 23, 2018 13,000 09 Mukesh singh November 14, 2017 October 27, 2017 54,209 Prabhakar Sidhayya 10 Maheshwaram July 17, 2018 July 13, 2018 41,760

6.2.3 It is observed from the above table that Dezire Research sold its advisory products and collected fees from the clients, even before it had communicated the risk profile of the clients i.e., the client has not had an opportunity to verify whether his/ her risk category has been correctly arrived at. In the case of Mr. Kali Charan, the difference between the date on which payment was received and risk profiling was communicated, was more than three months. Thus, it is prima facie observed that the products/services had already been sold by the IA and advisory fees had been collected from the client and services commenced even before communication of the risk profiling to the client.

6.2.4 Therefore, from the above it is prima facie found that the products sold by Dezire Research to its clients could be completely inappropriate to the clients’ need, as the risk profiling has not been communicated to the client before selling the product. It is also noted that the client has no means to know/verify whether information related to him has been correctly included in his / her risk profile statement and whether the Risk Assessment Form correctly reflects the risk assessment of the Interim Order in the matter of Dezire Research client, if the risk profile statement is not sent to the client. Thereby, the IA has not acted with due skill, care, diligence, honesty and in the best interest of its clients while providing investment advice appropriate to the clients’ risk profile.

6.2.5 In view of the same, Dezire Research has prima facie (a) failed to provide the investment advice appropriate to the clients’ risk profile in accordance with regulation 17 (a) of IA Regulations; and (b) failed to send risk profile statements / forms to the clients in accordance with Regulation 16(e) of IA Regulations; and (c) failed to abide by clauses 1 and 2 of the Code of Conduct of Schedule III read with Regulation 15(9) of IA Regulations. Thus, Dezire Research has prima facie violated the provisions of Regulation 17(a) and (b), 16 (e) and clauses 1 and 2 of the Code of Conduct as mentioned in Schedule III read with regulation 15(9) of IA Regulations.

6.3 Suitability Assessment: 6.3.1 As per Regulation 17 of the IA Regulations, the investment advice given should be appropriate to risk profile of clients; the IA should have a documented process for selecting investments to its clients based on their investment objective and financial situation; IA should understand the nature and risks of products or assets selected for clients; IA shall have reasonable basis for believing that a recommendation meets the client’s investment objective and the client is able to bear any related investment risks consistent with its investment objectives and risk tolerance; IA shall ensure that the client has the necessary experience and knowledge to understand the risks involved in the transaction; and the IA has to ensure that a recommendation given to client is based on reasonable assessment that the risk reward profile of financial product is consistent with client’s experience, knowledge, investment objective and risk appetite.

6.3.2 It is noted that during inspection, suitability of investment advice by Dezire Research has been analyzed by considering the products / services sold to 64 clients on sample basis. It is noted from the sample cases that IA provided investment advisory services without paying any attention to the risk profile and suitability of the advice to the client. A few instances are reproduced hereunder for reference: Interim Order in the matter of Dezire Research

I. SUBRAT SAHOO The risk profile of client provides that the proposed investment amount is up-to Rupees One Lakh. An amount of Rs. 1.4 lakhs have been charged by Dezire Research as advisory fees during the period 5 months from July 16, 2018 to November 23, 2018. From the analysis of invoices and SMS logs, it is noted that the client had subscribed to the Standard Cash services. It is however observed that tips for undertaking trades in Options have also been sent to the client. The screenshot of such an instance is reproduced hereunder:

As per the risk profiling form, the client falls under the medium risk category. This shows that though the client had medium risk appetite, yet high risk services/ tips have also been sent to the clients. From the above, I note that the IA provided investment advisory services without paying any attention to the risk profile and suitability of the advice to the client. II. MOHAMMAD ZAID SHAIKH The client is 20 years old and his annual income is less than Rs. 1 Lakh and also the proposed investment amount by the client is upto Rs 1 Lakh. The risk profile of client provides that the client has medium risk appetite. It is, however, observed that the services/ tips relating to options have also been sent to the client inconsistent with his risk profile. The screenshot of such an instance is reproduced hereunder:

III. DESH CHAND SHARMA The risk profile of the client provides that the proposed investment amount by the client is upto Rs 1 Lakh. It is also noted that the advisory fee charged by Dezire Research is more than Rs. 6 Lakhs within 2 months. The client is senior citizen aged 83 years. As per the risk profile, the client falls in moderate risk category. It is however observed that the client has been offered advisory services pertaining to high risk products viz. MPOS option service. The screenshot of such an instance is reproduced hereunder:

Interim Order in the matter of Dezire Research

6.3.3 It is noted from the sample analysis that Dezire Research has not adhered to the suitability of advisory product/ service sold to its clients. From the analysis of the data pertaining to clients on sample basis, it is observed that the products/services sold to the clients were not commensurate with the risk profile of the client. It appears that the products/ services have been sold to the client with the sole purpose of generating maximum income to the IA while showing scant regard to the suitability of such services to the client.

6.3.4 Thus, from the above, it is prima facie found that Dezire Research has given investment advice without adhering to suitability of services. It is also prima facie found that by not adhering to suitability of services, Dezire Research has not acted with due skill, care, diligence, honesty, fairly and in the best interest of its clients while selling products/services to its clients. In view of the same, Dezire Research has prima facie (a) failed to adhere to suitability of services provided to its clients in accordance with Regulation 17 of IA Regulations; and (b) failed to abide by clauses 1 and 2 of Code of Conduct of Schedule III read with Regulation 15(9) of IA Regulations. Thus, Dezire Research has prima facie violated the provision of Regulations 17 of IA Regulations and clauses 1 and 2 of the Code of Conduct as mentioned in Schedule III read with regulation 15(9) of IA Regulations.

7. Unfair and unreasonable advisory service fee charged from the client:

7.1 As per clause 6 of code of conduct specified in third Schedule of IA Regulations, an investment adviser, advising a client may charge fair and reasonable fees, subject to any ceiling as may be specified by the Board, if any. I note that the examination has prima facie found the following instances of collection of unreasonable / unfair fee.

7.2 From the examination of sample invoices of 64 clients, it is noted that Dezire Research has charged fees disproportionate to the annual income/proposed investment amount

Interim Order in the matter of Dezire Research of the clients, as disclosed in the respective risk profile forms of the clients. The following instances are noted in this regard:

I ANOOP ALEX ABRAHAM a. The risk profile of client mentions that the proposed investment amount by the client is Rs 1 to 2 Lakhs and the annual income of the client is Rs 5 to 10 Lakhs. However, the advisory fees charged by Dezire Research is more than Rs 32 Lakhs over a period of 17 months i.e. from August 14, 2017 to January 07, 2019.

II. XAVIER NADAR a. The risk profile of client mentions that the proposed investment was only Rs. 1 to 2 lakhs. However, overall 36 times payments have been obtained from the client and more than Rs. 18 Lakhs have been charged as service fees over a period of 8 months i.e. from May 12, 2017 to December 29, 2017.

III. KAMAL KISHORE GUPTA a. The risk profile of client mentions that the proposed investment amount by the client is between Rs 1 to Rs. 2 Lakh. It is, however, observed that Dezire Research charged more than Rs. 15 Lakhs in just 5 months (i.e. during the period from April 12, 2017 to September 14, 2017), as advisory fees.

IV.MOHAMMAD ZAID SHAIKH a. The risk profile of client mentions that the client is 20 years old and his annual income is less than Rs. 1 Lakh and also the proposed investment amount by the client is upto Rs 1 Lakh. It is, observed that Dezire Research charged are more than Rs 3 Lakhs during the period from August 20, 2018 to August 24, 2018 i.e. 4 days as advisory fees.

V.SHIVAKUMAR CHOUGULE

Interim Order in the matter of Dezire Research a. The risk profile of client provides that the proposed investment amount by the client is upto Rs.1 Lakh. It is, however, observed that Dezire Research had charged an amount of more than Rs. 27 Lakhs towards advisory fees in just 5 months (i.e. during the period from August 21, 2017 to January 31, 2018). Further, in 5 months, more than 20 times, payments have been obtained from the client.

7.3 From the above mentioned sample cases, it is prima facie found that Dezire Research has charged fees which are disproportionate to the annual income and/or proposed investments of its clients. 7.4 In order to determine the “reasonableness” of the fee charged by the Investment Adviser, I note that while no fixed standard can be devised to term whether the conduct of charging fee answers the test of reasonableness, it cannot also be stated that the reasonableness of the fee charged cannot be judged at all. The IA Regulations provides for the principle based determination of fee by the Investment Adviser indicating that such fees have to be fair and reasonable and the same can be tested as a violation of the Code of Conduct. What is reasonable in a particular circumstance may be the outcome of several factors which are relevant for such determination. While determining the reasonableness of the fee, the same has to be seen from the perspective of various factors such as proportionality etc. It is noted that Dezire Research has not been fair in its dealing with the clients as outlined above in view of disproportionate fee. I prima facie find that in view of the fee being disproportionate to the annual income and/or proposed investment of client, the fees are qualified as “unreasonable”.

7.5 Dezire Research sold the same advisory products/services to the clients before completion of the tenure of the previous service. It is observed that, in a few clients’ cases, during the initial months, Dezire Research took money and sold services/ products to clients, which would commence after 2/3 years from the date of payment done by the client. This in effect forces the investors to stay with the IA without any opportunity to sever their ties in case of dis-satisfaction with its services. This also in effect locks in the clients to continue with the services of the IA as the payment for the Interim Order in the matter of Dezire Research services have already been paid in advance and there is a ‘No Refund’ policy followed by the IA.

7.6 It is also noted from the following instances that Dezire Research sold the same advisory product/service more than once with overlapping subscription period and charged hefty amount as fees:

I. Xavier Nadar/Xavier Nirmal Kumar: Sl.No. Name of services alloted Services tenure Services tenure Total to client START DATE End DATE Amount charged to the client In Rs. Customized Service 1 HIGH 5-Aug-17 15 -Aug-17 50000 Customized Service 2 HIGH 16-Aug-17 22-Aug-17 30000 Customized Service 3 HIGH 23-Aug-17 27-Aug-17 20000 Customized Service 4 HIGH 28-Aug-17 07-Sep-17 50000 Customized Service 5 HIGH 08-Sep-17 14-Sep-17 30000 Customized Service 6 HIGH 15-Sep-17 21-Sep-17 30000 Customized Service 7 HIGH 22-Sep-17 26-Sep-17 20000 Customized Service 8 HIGH 27-Sep-17 01-Oct-17 20000 Customized Service 9 HIGH 02-Oct-17 12-Oct-17 50000 Customized Service 10 HIGH 31-Aug-17 10-Sep-17 50000 Customized Service 11 HIGH 11-Sep-17 22-Sep-17 55000

Interim Order in the matter of Dezire Research

Sl.No. Name of services alloted Services tenure Services tenure Total to client START DATE End DATE Amount charged to the client In Rs. Customized Service 12 HIGH 23-Sep-17 13-Oct-17 100000 Customized Service 13 HIGH 14-Oct-17 16-Oct-17 10000 Customized Service 14 HIGH 17-Oct-17 06-Nov-17 100101 Customized Service 15 HIGH 26-Jul-17 04-Aug-17 45000 Customized Service 16 HIGH 07-Nov-17 26-Jan-18 400000 Customized Service 17 HIGH 27-Jan-18 29-Jan-18 10000 Customized Service 18 HIGH 30-Jan-18 31-Mar-18 300000 Customized Service 19 HIGH 01-Apr-18 19-Apr-18 90000 Customized Service 20 HIGH 20-Apr-18 24-Apr-18 20000 Customized Service 21 HIGH 30-Dec-17 12-Jan-18 65000 Customized Service 22 HIGH 13-May-17 13-May-17 2000 Customized Service 23 HIGH 14-May-17 14-May-17 4000 Customized Service 24 HIGH 20-May-17 21-May-17 5000 Customized Service 25 HIGH 22-May-17 24-May-17 10000 Customized Service 26 HIGH 25-May-17 27-May-17 12000

Interim Order in the matter of Dezire Research

Sl.No. Name of services alloted Services tenure Services tenure Total to client START DATE End DATE Amount charged to the client In Rs. Customized Service 27 HIGH 28-May-17 31-May-17 17000 Customized Service 28 HIGH 01-Jun-17 05-Jun-17 20000 Customized Service 29 HIGH 06-Jun-17 11-Jun-17 25000 Customized Service 30 HIGH 12-Jun-17 15-Jun-17 15000 Customized Service 31 HIGH 16-Jun-17 22-Jun-17 30000 Customized Service 32 HIGH 23-Jun-17 24-Jun-17 5000 Customized Service 33 HIGH 21-Jun-17 22-Jun-17 5000 Customized Service 34 HIGH 25-Jun-17 29-Jun-17 20000 Customized Service 35 HIGH 30-Jun-17 09-Jul-17 45000 Customized Service 36 HIGH 10-Jul-17 25-Jul-17 75000 TOTAL 18,35,101

7.7 From the above, it is observed that Dezire Research has charged more than Rs.18 Lakhs for the same “Customized Service High” from the client and 36 invoices were raised. The amount of advisory service fees charged to the clients is manifold compared to the proposed investment amount by the clients i.e. Rs.1 to 2 Lakhs. Further, services in the above table at Sl. No. 4 & 5 indicate that service were sold for the period August 28, 2017 to September 14, 2017. From the service allotted at Sl.No. 10 in the table above indicate that the service was again sold for the period August 31, 2017 to September 10, 2017. From the above, it is noted that there has been overlapping of service period for the same service. Interim Order in the matter of Dezire Research

II. Abdul Khan: Total Name of Services tenure Services tenure dates of Amount services alloted START DATE End DATE payments charged to to client made by the client client In Rs. Customized 19-Dec-17 17-Feb-18 10-Nov-17 300000 Service Customized 18-Feb-18 22-Feb-18 21-Nov-17 21000 Service Customized 23-Feb-18 25-Feb-18 11-Dec-17 14250 Service Customized 21-Dec-17 03-Feb-18 20-Dec-17 220000 Service Customized 04-Feb-18 01-Mar-18 26-Dec-17 126000 Service

Total 5,55,250 Overlapping of service period is December 21, 2017 to Feb 03, 2018 (44 days) and Feb 18, 2018 to Feb 25, 2018 (07 days).

III Amar Uttam Patil: Name of Total Services tenure Services tenure Dates of services allotted Amount START DATE End DATE payments to client charged made by to the client client In Rs. Crystal Cash 25-Oct-18 29-Oct-18 13-Aug-18 8000 Pack Crystal Cash 30-Oct-18 02-Nov-18 16-Aug-18 6000 Pack Crystal Cash 03-Nov-18 23-Nov-18 26-Sep-18 36600 Pack Crystal Cash 25-Oct-18 18-Nov-18 24-Oct-18 45045 Pack Total 95,645 Overlapping of service period is October 25, 2018 to November 18, 2018 (24 days).

Interim Order in the matter of Dezire Research

7.8 From the perusal of information received from the IA during the inspection, in the following cases it is noted that the advisory service was provided by the IA after a considerable period of delay and in some cases, Dezire Research charged fees for a particular services, however, advisory services were provided for a different service. The details of such cases are as under:

a. Kali Charan: Multiple payments amounting to Rs.4,73,000 were collected from the client prior to completion of risk profile during the period November, 2017 to December, 2017. As per invoices, the service duration is mentioned to be commencing from November 22, 2017. However, from the message log analysis, it was noted that no message or tips were provided to the client till April, 2018. b. Jayant Sahoo: During November 25, 2017 to January 08, 2018 a total of 13 invoices were issued for the services of HNI STANDARD MCX and collected an amount of Rs.3,69,500 from the client. From the analysis of message log, it is noted that no service related to MCX products has been served to the client. Message or tips pertaining to equity options segment were only sent to the client. Thus, it appears that fees were received from the client for MCX services but different service was offered to the client.

7.9 From the above, I note that considering the annual income and/or proposed investment by the clients, Dezire Research had not charged fair and reasonable fees from its clients. Dezire Research has adopted dishonest business practices by selling the same advisory product/service more than once with overlapping subscription period. During such overlapped period, the clients would pay higher amount without receiving any commensurate benefits. Further, if the client is dissatisfied/ doesn’t want to continue with the services of IA, he did not have any option to discontinue such services since the payments have already been made by clients. It is also noted that advisory services were provided with considerable period of delay and charged fees for a product and given services of a different product to the client. These acts of Dezire Research prima facie, were meant to generate more and more service fees for itself and were not in the best interests of the clients.

Interim Order in the matter of Dezire Research

7.10 Thus, the services / packages sold by Dezire Research to its clients was not in a fair manner and was not in the interest of client; and Dezire Research did not exercise honesty in selling the product / services to its clients. It is prima facie found that Dezire Research has charged unfair and unreasonable fees from its clients and has not acted with fairness/honesty while charging advisory fees from the clients without having any regard to client’s best interest and the fiduciary capacity in which an IA is supposed to be associated with its client.

7.11 In view of the above, Dezire Research has prima facie (a) failed in its responsibility to act in fiduciary capacity to its client which is entrusted upon it under Regulation 15(1) of IA regulation and (b) failed to abide by clauses 1, 2 and 6 of Code of Conduct of Schedule III read with Regulation 15(9) of IA Regulations. Thus, Dezire Research has prima facie violated the provision of clauses 1, 2 and 6 of Code of Conduct as mentioned in Schedule III read with regulation 15(9) of IA Regulations and Regulation 15(1) of IA Regulations.

ISSUE No. 2: Whether Dezire Research has, prima facie, violated any provisions of SEBI Act read with PFUTP Regulations?

8. In the instant matter, it is prima facie found that: 8.1 Dezire Research provided investment advisory services without considering the risk profile and suitability of the advice to the client. Out of 47 sample clients, Dezire Research has not communicated risk profile for 37 clients. 8.2 Dezire Research has sold products to its clients which were not appropriate as per their risk profile. Dezire Research had sold high risk products / services to Medium risk clients which are not suitable for them as per their risk profile. 8.3 Dezire Research had sold its advisory products and collected fees from the clients, even before it had communicated risk profile for its clients. In some cases, the difference between the date on which payment was received and risk profiling was communicated, was more than three months. 8.4 Dezire Research has charged unreasonable amount of fees from clients, which is disproportionate to the annual income/proposed investment amount of the clients. 8.5 Dezire Research has adopted dishonest business practices such as selling the same advisory product/service more than once with overlapping subscription period, Interim Order in the matter of Dezire Research delay in providing the services, charging fees for a product and giving tips of a different product.

9. As per Regulation 3 of PFUTP Regulation, no person (including an IA) shall directly or indirectly use or employ any scheme or device to defraud in connection with dealing in securities; or engage in any act, practice, course of business which operates as fraud or deceit upon any person (clients) in connection with any dealing in securities in contravention of the provisions of the Act or the rules and the regulations made there under. 10. The modus operandi adopted by IA discussed hereinabove, prima facie, shows that IA was actually not practicing investment advisory in the manner envisaged under the IA Regulations, which essentially would involve advising the client considering his/ her financial situation, risk appetite, financial goal, etc. However, it is prima facie found that IA is knowingly and in a deceitful manner: 10.1 selling products / services to its clients without following the proper process of Risk Profiling of clients and suitability assessment of services; 10.2 selling products to its clients which are not appropriate to their risk profile i.e. ‘High Risk Category’ product / services sold to ‘Medium Risk Category’ clients; 10.3 selling its advisory products and collecting fees from the clients before communicating the risk profile to said clients; 10.4 charging fees from clients which is many multiples of their annual income/ proposed investment; and 10.5 selling services / packages with overlapping subscription period with huge amount of fees, delay in providing the services, charging fees for a product and providing services of a different product. The above activities, prima facie, are the devices adopted by the IA to defraud its clients in connection with their dealings in securities. Hence, IA is prima facie running a scheme and defrauding its clients, with an intention to maximize its income through advisory fees by employing above said devices, without caring for client’s needs and keeping its own interest ahead of its client’s interest.

11. Thus, the findings of the preliminary examination and the overall modus operandi discussed in this order, prima facie, shows that a scheme is knowingly employed by Interim Order in the matter of Dezire Research

Dezire Research to defraud its clients in connection with their dealings in securities and to maximize its revenue generation at the clients’ expense. Thus, the above discussed non-genuine and deceptive activities of IA are, prima-facie fraudulent and are covered under the definition of “fraud” under regulation 2(1)(c) of the PFUTP Regulations. Thus, Dezire Research through its fraudulent act / scheme as discussed above, has prima facie violated the provisions of Section 12A(a), (b) and (c) of the SEBI Act, 1992 and Regulations 3 (a), (b), (c) and (d) of the PFUTP Regulations.

ISSUE No. 3: If the answers to Issue No. 1 & 2 is in the affirmative, who is responsible for the violations?

12. I note that Mr. Nishant Chopra is the sole proprietor of Dezire Research. I note the legal status of the proprietary firm from the judgment of the Hon’ble Supreme Court of India in Ashok Transport Agency vs. Awadhesh Kumar & another, [(1998) 5 SCC 567] that “… A proprietary concern is only the business name in which the proprietor of the business carries on the business. A suit by or against a proprietary concern is by or against the proprietor of the business…”. Therefore, I find that Mr. Nishant Chopra is liable for the acts of Dezire Research.

ISSUE No. 4: If the answers to Issue no. 1 & 2 is in the affirmative, whether urgent directions, if any should be issued against those responsible for the violations?

13. An IA has to comply with all the provisions of IA Regulations which enables the IA to effectively discharge its functions in the interest of the investor. In all the aforesaid, Dezire Research has fallen short of requirements as envisaged under IA Regulations. Further, the intermediary should not abuse the certificate of registration granted to it, in any manner. 14. It is observed that the website of the IA is functioning and it is one of the medium via which new / prospective clients may subscribe to the services of the IA. As discussed in preceding paragraphs, the conduct of the IA has been prima facie found to be fraudulent in nature and is also in violation of IA Regulations. Thus, it is imperative

Interim Order in the matter of Dezire Research that the new / prospective clients be safeguarded from the activities of IA, which are prima facie, not as per the provisions of applicable laws. 15. As a regulator of the capital markets, SEBI has the duty to safeguard the interests of investors and protect the integrity of the securities market. Since the conduct of Dezire Research and its Proprietor Mr. Nishant Chopra, mentioned above does not prima facie appear to be in the interest of investors and the securities market, necessary action has to be taken against it immediately, else it may lead to loss of investors’ trust in the securities market. Considering the facts and circumstances of this case and the fraudulent scheme, plan, device and artifice as prima facie found in this case, I am convinced that this is a fit case where effective and expeditious preventive and remedial action is required to be taken by way of ad interim ex -parte order to protect the interests of investors and preserve the safety and integrity of the securities market. Such action needs to be taken not only to prevent any further harm to the existing investors but also to new / prospective investor.

16. It has already prima facie been found that many of Dezire Research existing clients have been sold services without any consideration of their financial situation, investment objective and risk profiling. The selling of such plans goes against the customized advice which would be required based on the investors’ risk profile. This requirement of risk profiling goes to the very root of suitability of investment advice as clients are required to get the investment advice based on their risk profile. Exposing the existing clients to such advice, which has no co-relation to their risk profile, is against the interest of those investors. Thus, in order to prevent the existing as well as the prospective clients from getting such advice which has no co-relation to their risk profile, urgent steps need to be taken against Dezire Research and its Proprietor Mr. Nishant Chopra. Further, as discussed hereinabove, the very nature of the investment advisory activity being practiced by Dezire Research has been found to be prima facie fraudulent and in violation of the provisions of PFUTP Regulations and IA Regulations.

In view thereof, allowing Dezire Research and its Proprietor Mr. Nishant Chopra to continue its services to its clients, regardless of whether they have complained against Dezire Research or not, would tantamount to allowing the prima facie fraudulent investment advisory activity to continue, which will be inimical to the interests of clients and will also be in contravention of what has been envisaged under the IA Regulations. Interim Order in the matter of Dezire Research

17. It is noted that permitting an investor to receive a service from Dezire Research and its Proprietor Mr. Nishant Chopra is prima facie not in consonance with the IA Regulations. Availing of Dezire Research service is detrimental even to the existing investors as Dezire Research and its Proprietor Mr. Nishant Chopra is not acting in the best interest of its client but is only maximizing its revenue / income through fee. The acts of Dezire Research and its Proprietor Mr. Nishant Chopra are not honest and fair towards its clients and give advice to investors which is not in accordance to their risk profile or as per their investment objective or as per client’s financial health. Exposing investors to such service also has the effect of interfering with the development of securities market, as victim of such services tend to lose faith in the securities market. Such an injury/detriment to the development of the securities market also qualifies as an “irreparable injury”. The objective of SEBI as enshrined in the SEBI Act is not only the protection of investors but also orderly development of securities market.

18. Further if an ex-parte order is not passed, many prospective investors may have to part with large fees and investment resulting into irreparable injury to themselves as the advice given by Dezire Research may not be as per their risk tolerance and the product offered to them may not be suitable as per their investment objectives and investment time horizon. However, if an ex-parte order is passed, what is at stake is right of the current entity herein vis-a-vis multitude of prospective and current clients of the entity. It may be noted that one of the underlying differences between the exparte orders in the case of private suits and ex-parte public enforcement actions, is the identification of the injured party. In private damage suits, the injured individual, as “whole”, is identifiable whereas ex-parte public enforcement actions, seeks to protect the floating multitude of investing public by preventing, continuous and imminent violations of the securities laws. The potential loss of the investors by following the advice of Dezire Research and its Proprietor Mr. Nishant Chopra and resultant loss of investor’s confidence and reliability of securities market, cannot be retrieved, if, prima facie, Dezire Research and its Proprietor Mr. Nishant Chopra is permitted to carry out its irregular investment advisory service. Therefore, I consider the balance of convenience is also not in favour of the entity.

Interim Order in the matter of Dezire Research

19. I, therefore find that pending conclusion of enquiry in the matter, in view of the prima facie evidence against Dezire Research, it is essential to take urgent steps to prevent Dezire Research and its Proprietor Mr. Nishant Chopra from acting as an investment advisor and representing through any media as an investment advisor and securities market activities and alienating any assets, whether movable or immovable, or any interest or investment or charge in any of such assets, so that the final remedies, if any, do not become infructuous. 20. Considering the above, in my view, the balance of convenience lies against Dezire Research and immediate steps need to be taken against Dezire Research and its Proprietor Mr. Nishant Chopra, to protect the investors / clients from freshly subscribing to or continuing to get such prima facie fraudulent / inappropriate / unsuitable investment advisory service by Dezire Research.

Order

21. In view of the foregoing, pending conclusion of enquiry, in order to protect the interests of the investors and the integrity of securities market, I, in exercise of the powers conferred upon me under Sections 11(1), 11(4), 11B(1) and 11D read with Section 19 of the SEBI Act and Regulation 35 of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 hereby direct by way of this interim ex-parte order, the following directions, which shall be in force until further orders: - 21.1 Dezire Research and its Proprietor Nishant Chopra are directed to:

i. not to access the securities market and buy, sell or otherwise deal in securities or associates themselves with securities market, directly or indirectly, in any manner whatsoever or on behalf of any of its clients through their accounts; ii. cease and desist from acting as an investment advisor including the activity of acting and representing through any media (physical or digital) as an investment advisor, directly or indirectly, and cease to solicit or undertake such activity or any other activities in the securities market, directly or indirectly, in any matter whatsoever; iii. not to divert any funds raised from investors, kept in bank account(s) and/or in their custody; Interim Order in the matter of Dezire Research iv. provide a full inventory of all assets held in their name, whether movable or immovable, or any interest or investment or charge on any of such assets, including details of all bank accounts, demat accounts and mutual fund investments, immediately but not later than 5 working days from the date of receipt of this order; v. not to dispose of or alienate any assets, whether movable or immovable, or any interest or investment or charge on any of such assets held in their name, including money lying in bank accounts except with the prior permission of SEBI; vi. to immediately withdraw and remove all advertisements, representations, literatures, brochures, materials, publications, documents, communications etc., in digital mode or otherwise, in relation to its investment advisory activity or any other activity in the securities market; vii. to remove all contents from website immediately and display only the content in its website that SEBI has passed interim order dated February 03, 2021 reproducing the directions mentioned in paragraph 21 and submit copy of the relevant web page to SEBI within five working days from the date of the receipt of this order.

21.2 If Dezire Research or its Proprietor Nishant Chopra have any open position in any exchange traded derivative contracts, as on the date of the order, they can close out/ square off such open positions within 3 months from the date of order or at the expiry of such contracts, whichever is earlier. Dezire Research or its Proprietor Nishant Chopra are permitted to settle the pay-in and pay-out obligations in respect of transactions, if any, which have taken place before the close of trading on the date of this order. 21.3 The Depositories are directed to ensure, that they neither permit any debits nor any credits in the demat accounts held by Mr. Nishant Chopra either individually or jointly. 21.4 The Registrar and Transfer Agents are directed to ensure, that they neither permit any transfer nor redemption of the securities, including Mutual Funds units, held by (a) Dezire Research and (b) Mr. Nishant Chopra either individually or jointly.

22. The prima facie observations contained in this Order, pending enquiry, are made on the basis of the material available on record. In this context, Dezire Research and its Proprietor Interim Order in the matter of Dezire Research

Nishant Chopra may, within 21 days from the date of receipt of this Order, file their reply/objections, if any, to this Order and may also indicate whether they desire to avail an opportunity of personal hearing on a date and time to be fixed on a specific request to be made in that regard.

23. This order shall come into force with immediate effect and shall be in force until further orders.

24. This order is without prejudice to the right of SEBI to take any other action that may be initiated against the aforementioned entity in accordance with law.

25. A copy of the order shall be served upon the entities, Stock Exchanges, Depositories and Registrar and Transfer Agents for necessary action and compliance with the above directions.

Date: February 03, 2021 MADHABI PURI BUCH Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Interim Order in the matter of Dezire Research