Interim Order in the matter of M/s Profit Guru and its proprietor Mr. Satish Shukla

Under Sections 11(1), 11(4), 11B and 11D of the Securities and Exchange Board of India Act, 1992 and Regulation 35 of Securities and Exchange Board of India (Intermediaries) Regulations, 2008

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

S. No. Name of the Entity PAN 1 M/s. Profit Guru (Proprietor: Mr. Satish Shukla) BLWPS1911G

In the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

1. M/s Profit Guru, Proprietor Mr. Satish Shukla, (hereinafter interchangeably referred to as “PG / IA/ Mr. Satish Shukla / Noticee”) is registered as an Investment Adviser under the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 (hereinafter referred to as the “IA Regulations”) with effect from September 18, 2015 under SEBI Registration No. INA000003510. As per the records available, the registered office of PG is at “415, Shekhar Central, Near Palasia Petrol Pump, A.B. Road, Indore, Madhya Pradesh – 452001”. The website address of PG is www.profitguru.co.in 2. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) ordered an inspection of PG vide order no. HO/2019-2020 dated November 13, 2019. The inspection was proposed to be carried out from December 09, 2019 by SEBI at the registered office of Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

PG. The focus of the inspection was to look into the compliance of regulatory requirements stipulated under SEBI Act, 1992 (hereinafter referred to as “SEBI Act”), IA Regulations, and circulars and guidelines framed thereunder.

Non-compliance of SEBI directions with respect to Inspection

3. SEBI, vide letter no. WRO/PLO/IMD/Insp./30268/2019 dated November 15, 2019, informed PG that an inspection of its books of accounts/records and other documents pertaining to its registration as an investment advisor will be carried out by SEBI, under Regulation 23 of IA Regulations. Accordingly, PG was advised to send its reply to the pre-inspection questionnaire latest by November 29, 2019. As noted from the records, PG acknowledged the said letter on November 15, 2019. Subsequently, PG produced a letter dated November 21, 2019 vide which it authorized Mr. Abhishek Mishra (a Company Secretary having membership number: A56048) to represent PG before SEBI.

4. Since PG had not given any reply to the aforementioned letter dated November 15, 2019, an email dated November 29, 2019 was sent by SEBI to PG instructing it to send the reply to the pre-inspection questionnaire. A reminder to the said email was also sent on December 02, 2019 to PG, however, no reply was received from PG.

5. SEBI, vide letter no. WRO/PLO/IMD/Insp./31891/1/2019 dated December 02, 2019 informed PG that the inspection of its books of account and other records shall commence from December 09, 2019 onwards. Subsequently, PG produced a letter dated December 04, 2019 (Annexure-E) vide which it submitted that, “Mr. Arvinder Ajmani is authorized to represent PG before SEBI, ILO to do all such act and deed as may be required with respect to Inspection”.

6. On the day of inspection (i.e. on December 09, 2019), the inspecting team reached the registered office of PG at 11 a.m., however, it was found that only security guard was present in the office and the entire office was vacant. On asking the guard about the owner of PG, the guard led the team to 6th floor of the same building at the address, “612”. It was noticed that 4 persons were present in the office who were surprised at the inspecting team visit. It was noted that none of the persons namely, Mr. Satish Shukla (proprietor of PG), Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

Mr. Abhishek Mishra or Mr. Arvind Ajmani (authorized persons of PG) were present in the office. The inspecting team asked the guard and the 4 persons present there to contact the aforesaid 3 persons of PG. The team was informed that the owner of PG is not in office due to some personal problems. The team tried to contact all the 3 persons over phone; however, none of them could be contacted.

7. It is noted that PG, despite giving its confirmation to cooperate with the inspection, has failed to do so by being absent during the inspection. Further, no explanation was given for the absence of the authorized persons. It is also noted that PG has not replied to the pre-inspection questionnaire sent by SEBI despite multiple reminders. In view thereof, PG has contravened the provision of IA Regulations by failing to furnish information relating to its activity as an IA during Inspection as required by the Board and not cooperating with SEBI by being absent during inspection. Therefore, PG has violated the following regulations, viz.-

 Regulation 13(a) of IA Regulations which states as under: “13(a) The Investment Advisor shall abide by the provisions of the Act and these regulations;”  Regulation 25(i) and (ii) read with 24(3) of IA Regulations which states as under, “25(i) It shall be the duty of every investment adviser in respect of whom an inspection has been ordered under the Regulation 23 and any other associate person who is in possession of relevant information pertaining to conduct and affairs of such investment adviser, including representative of investment adviser, if any, to produce to the inspecting authority such books, accounts and other documents in his custody or control and furnish him with such statements and information as the inspecting authority may require for the purpose of inspection.” and “25 (ii) It shall be the duty of every investment adviser and any other associate person who is in possession of relevant information pertaining to conduct and affairs of such investment adviser to give to the inspecting authority all such assistance and shall extend all such co-operation as may be required in connection with the inspection and shall furnish such information as sought by the inspecting authority in connection with the inspection.” “24(3) During the course of an inspection, the investment adviser against whom the inspection is being carried out shall be bound to discharge its obligations as provided in regulation 25”. Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

 Clause 8 of Code of Conduct for IA as specified under Third Schedule read with regulation 15(9) of IA Regulations which states as under, “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.” 8. In view of the above violations, PG is liable for action under regulation 28(b) and (e) of IA Regulations, 2013 read with regulation 35 of SEBI (Intermediaries) Regulations, 2008 which states as under, IA Regulations: Liability for action in case of default. 28. An investment adviser who – …………… (b) fails to furnish any information relating to its activity as an investment adviser as required by the Board; …………… (e) does not co-operate in any enquiry, inspection or investigation conducted by the Board; SEBI(Intermediaries) Regulations, 2008 35. Without prejudice to any order under the securities laws and the directions, guidelines and circulars as may be issued thereunder including an order under Chapter V of these regulations the Board may in the interest of the securities market, in the interest of the investors or for the purpose of securing the proper management of any intermediary, issue, necessary direction including but not limited to any or all of the following- (a) directing the intermediary or other persons associated with securities market to refund any money or securities collected from the investors under any scheme or otherwise, with or without interest; (b) directing the intermediary or other persons associated with securities market not to access the capital market or not to deal in securities for a particular period or not to associate with any intermediary or with any capital market related activity; (c) directing the recognised stock exchange concerned not to permit trading in the securities or units issued by a mutual fund or collective investment scheme; (d) directing the recognised stock exchange concerned to suspend trading in the securities or units issued by a mutual fund or collective investment scheme; (e) any other direction which the Board may deem fit and proper in the circumstances of the case:

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

Provided that before issuing any directions the Board shall give a reasonable opportunity of being heard to the persons concerned: Provided further that if the circumstances warrant any interim direction is required to be passed immediately, the Board shall give a reasonable opportunity of hearing to the persons concerned after passing the direction, without any undue delay. 9. The inspection team fetched the client master detail of PG with the help of an employee present there. From the extracted data, it was seen that PG had approximate 2500-2700 clients during the inspection period. However, this data may not be exhaustive as the entire client data may not be available on the software. The revenue generated by PG during inspection period is not available, as the IA has not replied to the pre-inspection questionnaire. However, as observed from the data collected from the PCs kept in the premises of PG, the total fees earned during the inspection period appears to be around Rs. 13,85,40,150. The figure is approximate as the Inspection team could not get the data of clients of PG due to non-cooperation of PG during the inspection.

Examination of the details available on website of PG:

10. From the details available on the website of PG, it is observed that –

10.1. The advisory business of PG is based on 'subscription model' wherein an investor pays for various services for getting daily stock tips; 10.2. The fees charged is based on the services / packages subscribed and the subscription period for the product is on a monthly, quarterly, half-yearly and yearly basis; 10.3. PG has not been doing financial planning for its clients and instead offers intra day or BTST stock tips; 10.4. PG provides telephonic and online assistance to its clients. 10.5. PG offers various packages Cash, Futures, Options, Agri, Bullion, Currency, etc. 10.6. The charges for the aforesaid packages depend upon the period of subscription. The advisory fee varies from Rs. 7,500/- p.m. to Rs. 4,20,000/- p.a. 10.7. The details of bank accounts, as available on the website of PG, is as under:

Sr. No. Bank A/c 1. Axis Bank Ltd. Branch: A. B. Road, Indore Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

Account No.: 916020012377930 NEFT/IFSC code: UTIB0001680

10.8. Further, as noted from the details mentioned on invoices issued to its clients, PG has the following bank accounts, viz.:

Sr. No. Bank A/c 1. State Bank of India Ltd/ Branch: Indore Account No.: 36191784125 NEFT/IFSC code: SBIN0011763 2. State Bank of India Ltd/ Branch: Indore Account No.: 38042844659 NEFT/IFSC code: SBIN0030463

10.9. Apart from the aforesaid bank accounts, PG is also collecting fees from PayU Money payment gateway.

Examination of SCORES complaints against PG:

11. SEBI has been receiving a number of complaints against PG. As on December 09, 2019, total 96 complaints, have been received against PG in SCORES portal during the inspection period, out of which 64 complaints were from unique complainants. It is noted that the complaints are, at times, trigger points for conduct of enquiry. There could be cases where the complaints might have been settled. However, the regulatory/enforcement issues raised by the complaints need to be addressed from a regulatory perspective. The number of complaints pending for resolution by PG as on the date of inspection is as under:

Year Pending Investors Complaints as on December 09, 2019 2018-19 3 2019-20 20 Total 23

12. Based on the availability of evidence, following complaints have been examined:

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

Sr. No. Name of Complainant SCORES registration No. 1. Pyarelal SEBIE/MP18/0001976/1 2. Dinesh Singla SEBIE/MP19/0000520/1 3. T.G. Srinivasa SEBIE/MP19/0001504/1 4. Anand Patel SEBIE/MP19/0000979/1 5. Srinivas Rao P. SEBIE/MP19/0002203/1 6. Pinalkumar Mistry SEBIE/MP19/0000223/1 7. Jai Prakash Singh SEBIE/MP19/0001858/1 8. Sunil Kothari SEBIE/MP19/0000366/1 9. Lokesh Galot SEBIE/MP19/0002655/1 10. Suresh Punia SEBIE/MP19/0001481/1 11. Khushranjan SEBIE/MP19/0001824/1

13. It is alleged that PG pursues clients telephonically and makes promises on phone calls but does not give anything in writing.

14. However, upon examination of the complaints and call recordings, emails and documents submitted by the complainants, documents retrieved from the office of PG, and details available on the website of PG etc., the following prima facie findings were observed against Profit Guru:

I. PG promised/assured profits to its clients:

15. Upon analyzing the complaints filed by the complainants and the material available on record, it is observed that PG has been promising profits on the investment made by the clients and luring them to avail its services.

15.1. PG has promised the following on its website www.profitguru.co.in to lure clients into taking its services: “You are surely going to make profits if you do investments on the basis of advisory given by our Profit Guru team….” “You are definitely going to make profits if you make investments on the basis of stock cash advisory given by our team….”

Such a statement is in the nature of promising assured returns and the same has been promised in its multiple services namely Cash, Cash HNI, etc. Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

15.2. From email dated August 31, 2018, sent by a representative of PG to its client Mr. Pinalkumar Mistry, who had lodged a complaint against PG on SCORES portal having SCORES registration no. SEBIE/MP19/0000223/1, it is noted that PG has sold ‘HNI special package’ to Mr. Pinalkumar. The extract of the email is produced below:

“Investment required: 1L – 1.20L Service Duration: Half yearly Service Amount: 6.9L ……….. Expected Return: 15L – 18L” Thus, from the above prima facie it appears that PG has conveyed expected returns/profits to the client, Mr. Pinalkumar in order to lure the client to subscribe to PG’s services. It is noted that even the claims of “expected returns” in the securities market gives false and misleading information to the clients. The said information is likely to influence the decision of investors dealing in securities.

16. It is therefore observed that PG has been promising profits to its clients, despite fully knowing that all the investments in securities market are subject to market risk and that such returns cannot be assured. Therefore, PG has made false and misleading representation to its investors. Any information that a SEBI registered intermediary puts out for the consumption of its existing and prospective clients has to be done with great responsibility and should be of such a nature that it enables investors to take reasoned and unbiased decisions regarding their investment. This act of promising profits along with conveying expected returns is prima facie, indulged for the purpose of luring more customers in its net and thereby increasing the income of the IA.

17. In view of the above, PG has prima facie failed in its responsibility to act in fiduciary capacity to its clients which is entrusted upon him under Regulation 15 (1) of IA Regulations. The above conduct is also an act of being dishonest on the part of PG and also not acting in the best interest of the clients. PG has prima facie failed to abide by clauses 1 and 2 of Code of Conduct as mentioned in Schedule III read with Regulation 15 (9) of IA Regulations. Thus, PG has prima facie violated the provision of clauses 1 and 2 of Code of Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

Conduct as mentioned in Schedule III read with regulation 15(9) of IA Regulations and Regulation 15(1) of IA Regulations as referred in paragraph 52.

18. An investment adviser is required to comply with SEBI Act and other applicable Regulations. An IA cannot make a false statement without reasonable ground for believing it to be true as mandated in of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”). An investment adviser cannot sell products by promising profits to investors as was being done by PG in the present case knowing fully well that all investments in stocks, derivatives, commodity derivatives, etc. in respect of which it was offering investment advice are subject to market risk. By promising profits, PG has tried to deceive its clients. Neither there exist any grounds for belief for such profits nor can any assurance of profits be given. Further, showing expected returns on investments regardless of the market segment or security in which the investment is made, knowing fully well that the same cannot be assured, is equal to knowingly misrepresenting the truth on the part of PG.

19. Such representation is therefore prima facie, fraudulent and is covered within the definition of “fraud” defined under regulation 2(1)(c) of PFUTP Regulations which states that “a knowing misrepresentation of the truth or concealment of material fact in order that another person may act to his detriment”. I also peruse Regulation 4(1) and 4(2)(k) of the PFUTP Regulations which states as follows: “4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a manipulative, fraudulent or an unfair trade practice in securities markets. (2) Dealing in securities shall be deemed to be manipulative, fraudulent or an unfair trade practice if it involves any of the following: ……….. (k) 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; ………..” Hence, PG has violated the provisions of Regulation 3 (a), (b), (c) and (d), 4(1) and 4(2)(k), (s) read with Regulations 2(1)(c)(1), (2) and (8) of PFUTP Regulations and Section 12A(a), (b) and (c) of SEBI Act, 1992 as referred in paragraph 49. Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

II. Unfair Dealings with Clients

A. Selling Multiple Services and collecting unreasonable and arbitrary payments:

20. Upon examination, it is observed that PG has lured its clients to buy/subscribe multiple packages. It is noted that PG sold multiple services and has collected unreasonable payments from its clients. PG acted in the said manner with an objective to maximize its fees and keeping its own interest ahead of its client’s interests. Some of the instances where PG has sold multiple services/products to clients are as under:

20.1. Client: Mr. Pinalkumar Mistry 20.1.1. From the documents provided by Mr. Pinalkumar Mistry who had lodged a complaint against PG on SCORES portal having SCORES registration no. SEBIE/MP19/0000223/1 following observations are noted: -

20.1.2. The details of the services sold by PG to the said client are noted as below:

Client risk Invoice Invoice Period of Service as Product category as Amount date per Invoice per RPF (Rs.) 30-11-0001 to 30-11- 27/06/18 Cash Tips Intraday High Risk 6627.5 0001 30-11-0001 to 30-11- 03/07/18 Future HNI Tips High Risk 60250 0001 30-11-0001 to 30-11- 05/07/18 Option HNI Tips High Risk 160654.2 0001 30-11-0001 to 30-11- 17/07/18 Future HNI Tips High Risk 150625.0 0001 30-11-0001 to 30-11- 18/07/18 Option HNI Tips High Risk 50007.5 0001 30-11-0001 to 30-11- 29/07/18 Future HNI Tips High Risk 27474 0001 30-11-0001 to 30-11- 31/08/18 Option HNI Tips High Risk 60839 0001

20.1.3. PG has taken multiple payments from Mr. Pinalkumar within a period of 2 months and generated multiple invoices for ‘Options HNI’ service with service fees of Rs. 1,60,654.2, Rs. 50,007.5, and Rs. 60,839. PG has further sold ‘Future HNI’ service to Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

the client during the same period with service fees of Rs. 60,250, Rs. 1,50,625.0, and Rs. 27, 474. as tabulated above. The period of service has not been clearly mentioned in the invoice (only says 30-11-0001 to 30-11-0001) and therefore, the client has no means to know the start and end date of the service. The client has been made to pay different amount of fees as mentioned above, for the same services without any clear mention of the period of service. There is no rationale behind charging such fees for same services without the period of service known to the client. Thus, the fees charged by PG is unreasonable and arbitrary.

20.1.4.From an email dated August 31, 2018, sent by a representative of PG to Mr. Pinal, it is noted that PG has sold ‘PG Special Package’ to the client, though the package is not mentioned anywhere on its website. It is further noticed from the aforesaid email, that the service amount of this package is Rs. 6,90,000/- while the investment required from client is Rs. 1 lakh- Rs 1.2 lakh, therefore the service fee itself is more than 6 times the proposed investment of the client. There is a preponderance of probability that charging a fee that is much more than the proposed investment of the client could only have been done by promising much higher return and therefore it is prima facie, deceitful conduct on the part of PG.

20.2. Client: Mr. Anand Patel 20.2.1. As per the invoices raised by PG in the name of client, Mr. Anand Patel, the details of services sold by PG to the said client are noted as below:

Payment Total Risk INV-NO Service Duration Date Amount categorization* CASH HNI PG-INV-7230 26-Oct-18 10,000 MEDIUM TIPS OPTION HNI PG-INV-7232 26-Oct-18 15,000 HIGH TIPS OPTION HNI PG-INV-7286 29-Oct-18 40,000 HIGH TIPS HALF CASH HNI YEARLY PG-INV7294 30-Oct-18 14,000 MEDIUM TIPS CASH HNI PG-INV7295 30-Oct-18 20,000 MEDIUM TIPS OPTION HNI PG-INV7298 30-Oct-18 20,000 HIGH TIPS Total 1,19,000 Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

Payment Total Risk INV-NO Service Duration Date Amount categorization*

*The Risk categorization has been obtained from the Client Master accessed from the PCs of PG. Since, PG has not cooperated with SEBI in the Inspection, the copies of Risk Profiling Form of clients could not be obtained.

20.2.2.From the above table, it is observed that PG has mentioned only the duration on the invoice i.e. half yearly and therefore the client has no means to know the actual start or end date of service. The client was made to make multiple payments. As mentioned in the above table, amount of Rs. 1,19,000/- has been collected from the client within 4 days (October 26th-30th) by selling service of ‘Cash HNI Tips’ and ‘Option HNI Tips’.

20.2.3. On analyzing the payment invoices received from the complainant as well as the data retrieved from the premises of PG, it is observed that ‘Cash HNI Tips’ was sold thrice in 4 days without mentioning the start or end date of service and by charging Rs. 10,000, Rs. 14,000 and Rs. 20,000. Similarly, ‘Option HNI tips’ was sold thrice in 4 days without mentioning the start or end date of service and by charging Rs. 15,000, Rs. 40,000 and Rs. 20,000. The client has been made to pay different amount of fees as mentioned above, for the same services without any clear mention of the period of service. There is no rationale behind charging such fees for same services without the period of service known to the client. Therefore, it can be said that the charging of fees by PG has no rationale and is arbitrary.

20.3. Client: Mr. Khush Ranjan 20.3.1. From the documents provided by Mr. Khush Ranjan who had lodged a complaint against PG on SCORES portal having SCORES registration no. SEBIE/MP19/0001824/1 dated July 26, 2019, it is noted that following payments have been taken by PG from the client: -

Payment Duration of Risk INV-NO Service Total Date the service categorization* 08-02-19 to INV8807 07-02-19 Cash Tips 3500 Medium Risk 22-02-19 Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

16-02-2019 to INV8900 15-02-19 105000 16-03-2020 02-03-2019 to INV9188 02-03-19 Cash HNI 135000 23-05-2019 TOTAL 243,500 *The Risk categorization has been obtained from the Client Master accessed from the PCs of PG. Since, PG has not cooperated with SEBI in the Inspection, the copies of Risk Profiling Form of clients could not be obtained. 20.3.2. From the above table, it is observed that client has been charged Rs. 2.435 lakh within a month for providing 2 services of Cash Tips and Cash HNI Tips at the same time. As noted from above, the client had paid Rs. 3,500 on 07/02/2019 for ‘Cash Tips’ services for the period 08/02/2019 to 22/02/2019. Before the expiry of this service, the same service was again sold on 15/02/2019 and Rs. 1,05,000 was taken for the same, for the period 16/02/2019 to 16/03/2020. While ‘Cash Tips’ was ongoing, ‘Cash HNI’ was sold to client on 02/03/2019 by charging Rs. 1,35,000 for the period 02/03/2019 to 23/05/2019. Thus, PG has sold multiple services before the expiry of the previous subscription and for overlapping periods.

20.4. Client: Mr. Jai Prakash Singh 20.4.1. Mr. Jai Prakash Singh lodged a complaint against PG on SCORES portal having SCORES registration no. SEBIE/MP19/0001858/1 dated July 30, 2019 in which he, inter alia, alleged that he had paid three-month fees but incurred losses based on trades done on the advice provided by PG.

20.4.2.The payment made by complainant to PG is given in the below table: -

INV-NO Payment Service Duration Total Risk Date (DMY) Amount categorization* INV11137 12-Jul-19 Cash 16-07-2019-To- 15,500 MEDIUM Premium 08-08-2019 Tips INV11165 15-Jul-19 Cash 19-08-2019- 20,000 MEDIUM Premium To-17-09-2019 Tips INV11164 15-Jul-19 Cash 18-09-2019- 5,000 MEDIUM Premium To-26-09-2019 Tips Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

INV-NO Payment Service Duration Total Risk Date (DMY) Amount categorization* INV11189 17-Jul-19 Cash HNI 18-07-2019-To- 20,000 MEDIUM Tips 30-07-2019 INV11190 17-Jul-19 Cash HNI 31-07-2019-To- 3,500 MEDIUM Tips 03-08-2019 *The Risk categorization has been obtained from the Client Master accessed from the PCs of PG. Since, PG has not cooperated with SEBI in the Inspection, the copies of Risk Profiling Form of clients could not be obtained. 20.4.3.From the above table, it is observed that, client has been charged Rs. 64,000 within 5 days for providing 2 services of ‘Cash Premium Tips’ and ‘Cash HNI Tips’ at the same time. As noted from the above, the client had paid Rs. 15,500 on July 12, 2019 for Cash Premium Tips for providing services during 16/07/2019 to 08/08/2019. Before expiry of this service, the same service was sold on July 15, 2019 twice for different periods i.e. 19/08/2019 to 17/09/2019 and 18/09/2019 to 26/09/2019. Similarly, ‘Cash HNI Tips’ service was sold to client on July 17, 2019 twice for different periods i.e. 18/07/2019 to 30/08/2019 and 31/07/2019 to 03/08/2019.

20.4.4. Thus, the client was made to pay for multiple subscriptions to the same package on the same day. It would be in the best interests of the client that instead of charging for the same service being extended over a period of multiple times, the payment for any subsequent service is taken only after the period of the current subscription/service has ended and the client has had the opportunity to use and experience the service first. By virtue of this practice, the client is already locked in to the services offered by having made advance payments for services to be delivered in the future.

21. From the above it is noted that PG has not been fair in its dealing with the clients. The amount of fees charged by PG from its client is unreasonable, arbitrary and unfair. 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 Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

particular circumstance may be the outcome of several competing 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, uniformity, multiplicity etc. However, the test of “reasonableness” of the fee, in my view does not mean, the same has been “agreed to and paid”. If such standard is adopted, the objective of the regulation of reasonableness of the fee would be defeated as the test of reasonableness is not on the basis of whether the sum of fee stands the test of “agreement” but on whether the said sum of fee stands the test of “reason”

22. The adoption of “fee” as a tool to force the investors to stay with the IA without any opportunity to sever their ties in case of dis-satisfaction, would in my view, surely be considered as “unreasonable”. In a scenario like this, even if the fee is not “unreasonable” in absolute standard, but the means by which it is collected should also qualify as reasonable. Further, not mentioning the period of service clearly in the invoice as in the cases of Mr. Pinalkumar Mistry and Mr. Anand Patel and making them subscribe to multiple packages without any clarity about the start and the end date of the service by charging different fees for same services qualifies to be unreasonable and arbitrary.

B. Charging fees higher than the income/proposed investment of the clients

23. As per Regulation 16 of IA Regulations, Investment Adviser shall carry out risk profiling of the client for ascertaining client’s risk tolerance, income details, loss absorbing capacity, capacity of accepting loss of capital, liabilities/borrowing, etc. Further, the risk profiling should be communicated to the client before the client agrees to accept the advice. As per Regulation 17 of IA Regulations, Investment Adviser shall ensure that all investments on which investment advice is provided is appropriate to the risk profile of the client. It should be, inter-alia, based on client’s investment objectives and his financial situation.

24. Upon analysis of complaints filed by the complainants against PG along with Risk Profiling Form (hereinafter referred to as “RPF”) and invoices of the clients and the Suitability Assessment Policy of PG, it is observed that PG has totally disregarded the RPF and the preferences given by the clients in the RPF and is charging exorbitant fees without Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

considering the clients’ income and proposed investment amount in order to generate more revenue for itself. Some of the instances are given below:

24.1. Client: Mr. Sunil Kothari 24.1.1. Mr. Sunil Kothari lodged a complaint against PG on SCORES portal having SCORES registration no. SEBIP/MP19/0000366/1 dated September 11, 2019, wherein he had alleged that PG has cheated him by taking a huge amount of fees.

24.1.2.From the RPF of Sunil Kothari retrieved from the PCs of PG, it is observed that gross annual income of Mr. Kothari is Rs. 5 lakhs to Rs. 10 lakhs. The client’s proposed investment amount is Rs. 2 lakhs to Rs. 5 lakhs. However, PG has taken an amount of Rs. 16.73 lakhs from the client, which is in total disregard to the financial condition of the client as disclosed in RPF of client.

24.2. Client: Mr. T. G. Srinivasa 24.2.1. Mr. T. G. Srinivasa lodged a complaint against PG on SCORES portal having SCORES registration no. SEBIE/MP19/0001504/1 dated June 19, 2019 wherein he had alleged that, “PG gave me a profit commitment of Rs. 11 lakhs and I paid them Rs. 358,100”.

24.2.2.As per the RPF done by PG, it is noticed that the client has a gross annual income of Rs. 1 lakh to Rs. 5 lakhs and proposed investment amount of between Rs. 1 lakh to Rs. 2 lakhs, however, PG has collected Rs. 365,100/- from him within 45 days, which is in total disregard to the financial condition of the client as disclosed in RPF of client.

24.3. Client: Mr. Pyarelal 24.3.1. Mr. Pyarelal lodged a complaint against PG on SCORES portal having SCORES registration no. SEBIE/MP18/0001976/1 dated June 27, 2018 wherein he had alleged that, “I deposited Rs. 3540 on December 27, 2017, subsequently, I was forced to deposit Rs. 8.46 lakh by 21st February 2018. Although, I was not interested, payments were taken from me, by blackmailing situation created by 3 employees”.

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

24.3.2. All the invoices issued by PG to the client were perused and are tabulated below:

INV-NO Payment Date Service Duration Total Amount (Rs.) PG- 27-12-2017 Stock Tips Two weeks 3,540 INV2077 PG- 29-12-2017 Stock Tips Quarterly 25,960 INV2106 PG- 29-12-2017 Stock Tips Two Weeks 10,325 INV2127 PG- 30-12-2017 Stock Tips Quarterly 47,200 INV2146 PG- 01-01-2018 Stock Tips Quarterly 72,570 INV2157 PG- 01-01-2018 Stock Tips Quarterly 29,500 INV2158 PG- 02-01-2018 Future Quarterly 11,800 INV2168 Premium Tips PG- 03-01-2018 Stock Tips Quarterly 18,880 INV2165 PG- 03-01-2018 Future Quarterly 88,500 INV2200 Premium Tips PG- 04-01-2018 Future Quarterly 64,900 INV2216 Premium Tips PG- 05-01-2018 Future Quarterly 47,200 INV2253 Premium Tips PG- 05-01-2018 Future Quarterly 41,300 INV2254 Premium Tips PG- 06-01-2018 Future Monthly 59,000 INV2265 Premium Tips PG- 06-01-2018 Future Monthly 35,400 INV2266 Premium Tips PG- 10-01-2018 Future Yearly 79,650 INV2344 Premium Tips PG- 11-01-2018 Future Quarterly 35,400 INV2361 Premium Tips PG- 11-01-2018 Future Monthly 44,250 INV2364 Premium Tips PG- 25-01-2018 Future Four Months 60,180 INV2698 Premium Tips PG- 02-02-2018 Future Four Months 50,032 INV2847 Premium Tips PG- 06-02-2018 Cash Premium Monthly 8,968 INV2887 Tips PG- 21-02-2018 Cash HNI Tips Five Months 11,800 INV3184 TOTAL 8,46,355/-

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

24.3.3.As per the RPF done by PG, it is noticed that the client has a gross annual income of Rs. 1 lakh to Rs. 5 lakhs; proposed investment amount of between Rs. 1 lakh to Rs. 2 lakhs; and the current market portfolio is Rs. 1 lakh to Rs. 2 lakhs; however, PG has collected Rs. 846,355/- from him within 50 days, which is in total disregard to the financial condition of the client as disclosed in RPF of client.

24.3.4.It is also seen from the RPF of the client that the client was offered Future Premium Tips on the day of RPF, i.e. December 27, 2017, however, the invoices have been generated for Stock Tips also. By following such unethical practices, PG has collected revenue of Rs. 846,355 within a short period of 50 days by selling four services to the client. PG acted in the said manner with an objective to maximize its revenue by charging fees multiple times, and keeping its own interest ahead of its client’s interests.

25. The risk profiling exercise done by PG is to merely fulfill the requirement of IA Regulations. The RPF has actually not been followed in spirit and the fee has been charged disproportionately. It is also observed that PG has not obtained signatures on RPF, for instance in the case of clients Mr. Sunil Kothari, Mr. T.G. Srinivas, Mr. Pyare Lal. The same shows that the RPF was not sent to the clients which is in violation of Regulation 16(e) of the IA Regulations. Further, the requirement of suitability demands that IA is required to advise a product which is appropriate to the risk profile of the client which is dependent on the income details of the clients. Thus, PG is required to take into account the annual income of the client while advising a product. However, PG has not considered clients’ income while selling the products and charging fees from the clients. It does not stand to reason how so many products which cost more than the annual income can be sold to the clients unless the same is in breach of the requirement of suitability criteria in terms of Regulation 17 of the IA Regulations. The fact that such fees were charged shows that multiple products were sold to the client solely with the objective of charging higher fees. Therefore, PG has also failed to act in the interests of client and has totally disregarded the RPF of the client and the preferences given by client in the RPF.

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

26. It is the duty of Investment Adviser to act with due skill, care and diligence in the best interests of its clients. PG has kept his own interest at higher pedestal compared to the interest of his clients. It is observed that PG has failed in its responsibility to act in fiduciary capacity to its clients, which is entrusted upon him under regulation 15 (1) of IA Regulations. In view of the above, PG has prima facie failed to comply with Regulations 15(1), 16 (e), 17 (a) of IA Regulations and has also prima facie failed to abide by Clauses 1, 2, 6, 8 of Code of Conduct as mentioned in Schedule III read with regulation 15(9) of IA Regulations as referred in paragraph 52.

C. Charging Unfair and Unreasonable fees for same kind of services

27. It is observed that PG has adopted unethical business practices to manipulate the clients into buying multiple packages by designing a variety of services which have different fee structure but essentially same offering (stock tips). The comparison of three services are tabulated below (as taken from PG website): Details Cash Basic Cash Premium Cash HNI Salient  Limited but Quality 3-  Limited but Quality 2-  1-2 Intraday Advisory Feature 4 calls on a daily basis. 3 calls on a daily basis. daily via SMS and  Proper follow ups of  Proper follow ups of phone calls. calls with Timely Entry calls with Timely  We provide you NSE, and Exit with Stop Entry and Exit with BSE & Equity Research loss. Stop loss. call  Stock to watch  Stock to watch  Proper follow ups of provided in Early provided in Early calls with Timely Entry Morning. Morning. and Exit with Stop loss.  Nifty and Bank Nifty  Nifty and Bank Nifty  Stock to watch provided overview provided overview provided in Early Morning. before market. before market.  Pre Market Calls  Timely World Market  Timely World Market  Timely World Market updates. updates. updates.  Free Daily & Weekly  Free Daily & Weekly  Free Daily & Weekly Reports. Reports. Reports.  24/7 customer support  24/7 customer support  24/7 customer support  We provide you call  Assistance by call as  We provide you call through SMS well as messages through SMS. Monthly Rs. 11,000 Rs. 21,000 Rs. 50,000 fees Quarterly Rs. 29,000 Rs. 55,000 Rs. 130,000 fees Half- Rs. 50,000 Rs. 95,000 Rs. 230,000 Yearly Fees Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

28. As seen from the table above, PG is offering three kind of intra-day services which are essentially giving 2-4 intra-day calls to clients with 24/7 customer support, daily/weekly reports, etc. Despite having similar offerings in the 3 services (especially Cash basic and Cash Premium which hardly has any difference), the prices charged for them are very much different. Example- The monthly fees for Cash basic is Rs. 11000, for Cash Premium is Rs. 21,000 while for Cash HNI is Rs. 50,000.

29. As per the prescribed Code of Conduct, investment advisers shall ensure that fees charged to the clients are fair and reasonable. Charging of reasonable fees includes not only the quantum of fees to be charged for a particular service but also the mode or manner in which the fees are levied on the clients. From the above observations, it is seen that the PG has deliberately devised multiple packages (which are essentially offering similar service) to earn huge amount of service fee from its clients.

30. From the above (viz., selling multiple services and collecting unreasonable and arbitrary payments; charging fees higher than the income of the clients; charging unfair and unreasonable fees for same kind of services), it is clear that PG has adopted dishonest business practices and dealt unfairly with its clients. These acts of PG are prima facie, meant to generate more and more service fees for itself and is clearly not in the best interests of the clients. Therefore, I am of the, prima facie view that PG has collected an unreasonable quantum of fees from its clients in an unfair manner 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.

31. In view of the above, PG has prima facie (a) failed in its responsibility to act in fiduciary capacity to its client which is entrusted upon him 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, PG 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 as referred in paragraph 52. Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

III. Irregularities in Risk Profiling of the clients:

A. Changing the Risk Categorization of Clients multiple times.

32. Upon examination it is observed that PG has changed the Risk categorization of its clients multiple times. Some of the instances are given below:

32.1. Client: Mr. Anand Patel 32.1.1. Mr. Anand Patel lodged a complaint against PG on SCORES portal having SCORES registration no. SEBIE/MP19/0000979/1 on March 18, 2019, wherein he had alleged that, “IA has forcefully taken his money and never started his service. Further, he has paid Rs. 1 lakh to IA. However, IA is demanding more and more money from him”. Mr. Anand had requested SEBI to refund the money and also forwarded invoices issued by PG and some of the emails exchanged with him.

32.1.2.The amount collected by PG from the complainant is given below (data gathered from the client master data as retrieved from PCs kept in the premises of PG): -

Payment Total Risk INV-NO Service Duration Date Amount categorization* ONE PG-INV4676 31-May-18 OPTION TIPS 3,540 HIGH MONTH CASH HNI PG-INV-7230 26-Oct-18 10,000 MEDIUM TIPS OPTION HNI PG-INV-7232 26-Oct-18 15,000 HIGH TIPS OPTION HNI PG-INV-7286 29-Oct-18 40,000 HIGH TIPS HALF CASH HNI YEARLY PG-INV7294 30-Oct-18 14,000 MEDIUM TIPS CASH HNI PG-INV7295 30-Oct-18 20,000 MEDIUM TIPS OPTION HNI PG-INV7298 30-Oct-18 20,000 HIGH TIPS Total 122,540

*The Risk categorization has been obtained from the Client Master accessed from the PCs of PG. Since, PG has not cooperated with SEBI in the Inspection, the RPF of clients could not be obtained.

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

32.1.3. As per the RPF, Mr. Anand has been categorized as High Risk client and was offered the service of Option Tips in May 2018. Subsequently, as per the above table there was a revision in the risk categorization in just one day i.e., on October 26, 2018. Firstly, the client who was categorized as Medium risk was offered the service of Cash HNI Tips. Secondly, same client has again been categorized as High Risk client on the very same day and was offered the service of Option HNI Tips. It does not stand to reason how within a day the risk categorization of a person would drastically change. No explanation in this regard was available on record as PG was not co-operating in the inspection.

32.2. Client: Mr. Dinesh Singla 32.2.1. Mr. Dinesh Singla lodged a complaint against PG on SCORES portal having SCORES registration no. SEBIE/KN19/0000520/1 on September 25, 2019, wherein he had alleged that, “IA has initially offered a plan of one month, forced him to purchase a plan of 1 year, there were revision in duration of plan i.e. 6 months. Company has also handled their demat password and user id”.

32.2.2.Mr. Dinesh has forwarded invoices issued by PG and the same is listed in the below table:

INV-NO Payment Service Duration Total Risk Date (DMY) Amount categorization* INV11520 12-Aug-19 Cash Tips 14-08-2019- Medium To-20-08-2019 2,000 INV11541 14-Aug-19 Cash Tips 21-08-2019- M e d i u m To-15-09-2019 9,000 INV11593 21-Aug-19 Cash Premium 23-08-2019- M e d i u m Tips To-31-08-2019 5,000 INV11680 29-Aug-19 Cash Tips 16-09-2019- M e d i u m To-30-09-2019 5,000 INV11765 02-Sep-19 Cash Premium 04-09-2019- M e d i u m Tips To-16-12-2019 71,500 INV11827 10-Sep-19 Cash HNI Tips 12-09-2019- M e d i u m To-30-10-2019 80,000 INV12833 15-Nov-19 MCX Tips 19-11-2019- H i g h To-04-12-2019 10,000 INV12950 21-Nov-19 MCX Tips 05-12-2019- H i g h To-14-12-2019 5,500 INV13068 26-Nov-19 MCX Tips 03-02-2020- H i g h To-05-02-2020 1,000 Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

INV13069 26-Nov-19 MCX Tips 31-01-2020- H i g h To-02-02-2020 1,000 INV13067 26-Nov-19 MCX Tips 16-12-2019- H i g h To-30-01-2020 30,000 Total 2,20,000 *The Risk categorization has been obtained from the Client Master accessed from the PCs of PG. Since, PG has not cooperated with SEBI in the Inspection, the copies of RPF of clients could not be obtained. 32.2.3. From the above table it is observed that the client has been offered services of Cash Tips, Cash Premium Tips and Cash HNI Tips by categorizing him as Medium Risk client during the months of August 2019 to September 2019. During November 2019, client has been re-categorized as High Risk client and was offered the service of MCX Tips for the period November 2019 till February 2020. It does not stand to reason how the risk categorization of a person would change from Medium to High. No explanation in this regard was available on record as PG was not co-operating in the inspection.

32.3. Client: Mr. T. G. Srinivasa 32.3.1. Mr. T. G. Srinivasa lodged a complaint against PG on SCORES portal having SCORES registration no. SEBIE/MP19/0001540/1 on June 19, 2019, wherein he had alleged that, “one of the representative has called him and gave him a commitment plan of Rs. 11 lakh. He had paid Rs. 3,58,100 to him and also provided demat account details of Zerodha and Goodwill. There was loss incurred”.

32.3.2.Complainant has forwarded invoices issued by PG and the same is listed in the below table:

Total Risk INV-NO Payment Date Service Duration Amount categorization* Cash Premium Not available 25-Feb-19 One week 5,500 Not available Tips Not available 07-Mar-19 Option Hni Tips Two Week 16,400 Not available Not available 11-Mar-19 Option Hni Tips Two Week 13,600 Not available Not available 13-Mar-19 Cash Hni Tips Two Week 20,000 Not available 14.03.19 to Pg-inv-9335 13-Mar-19 Cash Hni Tips 25,000 Not available 29.03.19 PG-INV9438 18-Mar-19 Cash Hni Tips One Month 50,000 Not available Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

PG-INV9506 22-Mar-19 Stock Tips One Month 70,000 Not available Not available 28-Mar-19 Cash Hni Tips One Month 55,000 Not available Not available 30-Mar-19 Cash Hni Tips One week 15,000 Not available 22-06-2019- INV9701 05-Apr-19 Cash Hni Tips To-28-06- 10,000 Medium 2019 29-06-2019- INV9738 09-Apr-19 To-02-07- 5,000 Medium Cash Hni Tips 2019 03-Jul-2019 to INV-9763 11-Apr-19 25,000 Not available 18-07-2019 27-04-2019- INV9913 26-Apr-19 Option Hni Tips To-15-05- 30,000 High 2019 22-07-2019 to PG-INV9946 29-Aprr-19 Cash Hni Tips 15,000 Not available 31-07-2019 19-07-2019- INV9947 30-Apr-19 Cash Hni Tips To-21-07- 2,600 Medium 2019 02-05-2019- Cash Premium INV9976 30-Apr-19 To-12-05- 7,000 Medium Tips 2019 TOTAL 3,65,100 *The Risk categorization has been obtained from the Client Master accessed from the PCs of PG. Since, PG has not cooperated with SEBI in the Inspection, the copies of RPF of clients could not be obtained. 32.3.3. From the above table it is observed that the client has been classified as Medium Risk client as well as High Risk client in the month of April 2019.

33. In all the above cases, the Risk categorization of clients were changed multiple times. There is no material on record to support the basis of change of Risk categorization in view of the non-co-operation of PG. Further, in the case of Mr. T. G. Srinivasa, it is noted that products have been sold to the client without any Risk categorization in violation of regulation 16 of the IA Regulations. Prima facie, it appears that such change in risk profiling has been done without any basis, except for the reason of selling products to the clients for increasing the fee for the IA. The above act of PG, prima facie, comes under the purview of ‘fraud’ as defined under regulation 2(1)(c) of PFUTP Regulations, 2003 and is a contrivance to induce the investors to deal in securities. Thus, PG has violated regulation 3(a), (b),(c) and (d) of PFUTP Regulations, 2003 read with section 12A(a),(b) and (c) of SEBI Act as referred in paragraph 49. Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

34. Further, PG has failed to act in fiduciary capacity and proper due diligence is not being carried out by PG. PG has failed to carry out its obligations and responsibilities cast upon him under IA Regulations and violated regulation 15(1) and clause 1, 2 and 8 of Code of Conduct for IA as mentioned in Third Schedule read with regulation 15(9) of the IA Regulations as referred in paragraph 52.

B. Inappropriate Risk profiling

35. PG has a Risk profiling questionnaire with 21 questions to measure risk appetite/tolerance of the clients. On perusal of the Risk Profiling Questionnaire of PG, the following observations are made. Risk Profile of PG includes following 03 questions to ascertain risk appetite of the clients:

a. Would you invest where a small return is earned associated with small risk instead of a high return associated with high risk? b. When market is not performing well would you like to invest in more risky investment instead of less risky investment to earn high return? c. High risk is associated with high return, Medium risk is associated with medium returns and low risk is associated with low returns? What risks can you bear (not prefer)?

36. As per regulation 16(d)(ii) of the IA Regulations, the Risk Profile Questionnaire should be fair, clear and not misleading and the questionnaire should not be structured in a way that it contains leading questions. The 3 questions mentioned above are leading questions. For example-the expression “High risk is associated with high return…” has the expected answer in built in the question itself, and would inevitably lead the client to respond that he can bear high risk as it is associated with high return.

37. From the questions mentioned above, it is clear that the questions used for assessing risk profile of the clients are leading questions designed to induce clients. It further appears that such questions have been framed to make the clients fall in the high risk category so that they can be offered complex products like derivatives. Therefore, it is observed that the Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

questions are leading questions and prompts the clients to respond to the questions in a certain way.

38. In view of the above, PG has prima facie failed to comply with Regulations 16(d) of IA Regulations and has also prima facie failed to abide by Clauses 1, 2 of Code of as mentioned in Schedule III read with regulation 15(9) of IA Regulations as referred in paragraph 52. The misleading manner in which questions have been framed suggests that PG has devised a deliberate ploy to categorize a particular investor in the high risk bracket, so that PG can earn large amount of fees by providing advices in all types of products including products in futures and options segment.

IV. Non Redressal of Investor Grievances

39. SEBI vide Circular CIR/OIAE/2014 dated December 18, 2014 regarding Investor grievances through SEBI Complaints Redress System (hereinafter referred to as “SCORES”) platform has advised that all SEBI registered intermediaries shall review their investor grievance redressal mechanism so as to further strengthen it and correct the existing shortcomings, if any. The SEBI registered intermediaries, to whom complaints are forwarded through SCORES, shall take immediate efforts on receipt of a complaint, for its resolution, within thirty days. Further, the said circular has stated that in case of failure by SEBI registered intermediaries to file Action Taken Report (hereinafter referred to as “ATR”) under SCORES within thirty days of date of receipt of the grievance, it shall be treated as failure to furnish information to SEBI and deemed to constitute non-redressal of investor grievance.

40. It is observed from the data obtained from SCORES that 23 unique complaints are pending against PG as on December 09, 2019. Out of such 23 complaints, it is seen that in 04 complaints, PG had filed the ATR in more than 30 days which is not in compliance with directions given in the SEBI Circular CIR/OIAE/2014 dated December 18, 2014. The details of pending complaints in which PG had filed ATR after 30 days and complaints in which PG has not yet filed any reply from the date of last communication are given below.

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

Sr. SCORES Name of Date of Date of Date of Diffe Date of last No. Complaint Complainant receipt of forwarding receipt of rence communicat number complaint the initial reply betw ion complaint from IA (Y) een X to IA (X) and Y 1 SEBIE/MP19/ Anand patel 18/03/2019 26/04/2019 09/06/2019 44 25/10/2019 0000979/1 2 SEBIE/MP19/ Mistry 27/12/2018 07/02/2019 02/05/2019 84 16/11/2019 0000223/1 pinalkumar ramanlal 3 SEBIE/MP18/ Pyare lal 27/06/2018 16/08/2018 20/09/2018 35 16/10/2019 0001976/1 4 SEBIP/MP19/ Kiran aravalli 19/09/2019 25/09/2019 16/11/2019 52 22/11/2019 0000376/1 5 SEBIE/MP19/ Jai prakash 30/07/2019 03/08/2019 07/08/2019 4 31/10/2019 0001858/1 singh 6 SEBIE/MP19/ Sureshpunia 17/06/2019 18/06/2019 02/07/2019 14 31/10/2019 0001481/1 7 SEBIE/MP19/ Vikash kumar 03/06/2019 12/06/2019 24/06/2019 12 23/09/2019 0001429/1

41. As mandated under Regulation 21(1) of IA Regulations, “An Investment adviser shall redress client grievances promptly”. Since, the IA has not submitted the ATR in a time bound manner as prescribed by SEBI and has also not resolved investors’ grievance, prima facie it appears that the IA has not complied with SEBI Circular CIR/OIAE/2014 dated December 18, 2014 and Regulation 21(1) of IA Regulations.

42. In summary, following prima facie findings are observed:

42.1. That PG has contravened the provision of IA Regulations by failing to furnish information relating to its activity as an IA as required by SEBI and not cooperating with SEBI by being absent during inspection.

42.2. That despite knowing the fact that the investment by clients based on the advice given by Investment Adviser is subjected to market risk, PG has been promising profits to its clients on their investments.

42.3. That PG has not been fair in its dealing with the clients. The amount of fees charged by PG from its clients is unreasonable, arbitrary and unfair. PG has adopted dishonest business practices by making the client subscribe to multiple subscriptions before the Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

expiry of previous subscription and charging unfair and unreasonable fees. Further, PG has charged disproportionate and exorbitant fees without considering the clients’ income and proposed investment amount as mentioned in the RPF.

42.4. That PG has failed to take due care and diligence to ascertain risk profile of the client and to offer him suitable advice by indulging in activities such as changing RPF of clients multiple times and framing leading questions in the RPF in order to mislead the clients and categorize them in the high risk bracket.

42.5. That PG has failed to redress its investor grievances within the timeline prescribed by SEBI.

43. Additionally, SEBI has also taken note of the complaints made against PG in SCORES portal. The said complaints have not been relied upon to arrive at the aforesaid prima facie findings against PG, nevertheless have been reproduced below to represent the allegations against PG and to take a holistic view on the violations committed by PG.

43.1. Upon analysis of complaints from SCORES, the following call recordings obtained from the complainants reflects assured profits promised by PG to its clients:

43.1.1. From the call recordings provided by one of the clients, Mr. Lokesh Galot, who had lodged a complaint against PG on SCORES portal having SCORES registration number SEBIE/MP19/0002655/1, it is noted that the representative of PG has been promising returns (earning 1% daily from the market) to the client. The transcript of conversation of one the representatives of PG with Mr. Lokesh Galot is given below:

Call recording at 1:15: PG “Toh kyon na aap apne paise ka utilize kare proper intraday mein agar 20,000 ka investment hain, aap din ka hazaar, do hazaar rupaye bhi kamate hain toh sir mahine ka hota hain around 20,000 to 30,000, agar apan yearly bhi baat karte hain to aaraam se jaata hain sir do lakh ke above.” Call recording at 2:32: PG “Yadi aap din ka 1% Kamate ho, Saal me hote hai 365 din, Agar hum Baat kare 200 din ki bhi, agar 200% return apne liya to kya koi jyada investment hai aapka, apne jo 20,000 lagaya hai, wo paisa Market se Kamane ke liye lagaya hai, naa ki bas lagaane ke liye”

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

43.1.2. Mr. T.G. Srinivasa, had lodged a complaint against PG on SCORES portal having SCORES registration number SEBIE/MP19/0001504/1 alleging that PG had offered him a commitment plan of Rs. 11 Lakhs and the client paid PG Rs. 3,58,100/- and ended up making a loss of Rs. 75,000/-. From the call recordings provided by Mr. T. G. Srinivasa, it is noted that the representative of PG has been promising to recover the losses previously incurred by the client on accounts of trade executed on the advice of PG and also service charges paid by the client to PG. The transcript of conversation of one the representatives of PG with Mr. Srinivasa is given below: -

Call recording at 4:29: PG “mein aapko mail par likh kar dene ko taiyaar hu, 4 mahine mein itna aapko profit, itna return aapko nikalkar de dunga mein, plus aapko apni jeb se kuch bhi na…, aapko apni jeb se kuch bhi nahi dena hai, sir, hum yaha se khud amount jo bhi rahega aapki limit mein hum khud yaha se transfer…., mein aapko, hum aapko amount transfer kar denge, aap apne demat mein daliye, theek hai, phir jo bhi rahega daily basis par mein khud aapko kam karaunga or aap within 4 month ka aap time dijiye mujhe mein aapko proper sir aapko mail par bhi de dunga, aap 4 month ka time dijiye mujhe, mein aapko proper sab karwa dunga jitna aapko losses hua hai plus jo bhi loss vagera, jo aapne company ko pay kiya hai, woh pura ka pura aapko nikalkar de diya jayega, theek hain, ek baar aap bharosa kijiye sir aur 4 mahine ka time dijiye Client: nahi nahi bharosha karke hi aapko paisa diya hai PG: toh phir wahi to mein aapse keh raha hu sir ek baar bharosha kijiye, aapko, ek baat bataiye sir, aapko toh kuch paisa nahi dena hai, mein aapko ye to nahi bol raha hu ki aap demat mein phir se paisa daliye, maine aapse toh nahi kaha ki aap daliye, mein khud bol raha hu ki, theek hai sir, hum daal denge aapke demat mein paisa hum daal denge, teek hain, aap daily basis par kaam karwaunga mein aapko, profit dhire dhire nikalta hain, aap chaho to sir har 10 din 15 din mein pay out dalte rehna, jaise maan lo 40 hazaar 50 hazaar ka profit hua hain aapko lag raha hain to aap 10 din 15 din mein pay out nikalte rehna, theek hai, Client: aap mail kar dijiye mereko PG: bilkul bilkul mein mail kar dunga, shriniwasan ji, mein aapko mail kar dunga, but aap mujhe ab bataiye ke apna 70 thouand ka aap bol rahe na losses hua hai?? 43.2. Mr. Kiran Arravalli, Mr. S.K. Gupta, who had filed complaints in SCORES, vide email dated December 12, 2019 has mentioned that they have not received any RPF form or suitability assessment form from PG. Thus, it appears that PG either hasn’t done the risk profiling and suitability assessment of the clients or if done, the same has not been Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

communicated to the clients. Since, PG has not cooperated with SEBI in the inspection, the allegation raised by the complainant could not be verified.

44. The definition of investment adviser as given in regulation 2(m) of the IA Regulations, states that investment adviser means “any person, who for consideration, is engaged in the business of providing investment advice to clients or other persons or group of persons and includes any person who holds out himself as an investment adviser, by whatever name called”. Regulation 2(l) of the IA Regulations defines investment advice as “advice relating to investing in, purchasing, selling or otherwise dealing in securities or investment products, and advice on investment portfolio containing securities or investment products, whether written, oral or through any other means of communication for the benefit of the client and shall include financial planning.”

45. On a perusal of these definitions, it becomes clear that the role of an “investment adviser” envisaged under IA Regulations is that of a person rendering advice relating to investing, buying, selling or dealing in securities or investment products and advice relating to investment portfolio containing securities / investment products. In my view, looking at the scheme of IA Regulations, the role of an investment adviser is to provide honest and fair advice to its clients considering their financial situation, investment experience, investment goals, etc. The investment adviser should also make adequate disclosures of the relevant material information to its clients and should charge fair and reasonable fee from its clients, which is also stipulated under the Code of Conduct for investment advisers under the IA Regulations.

46. An investment adviser is required to comply with SEBI Act and other applicable Regulations. An investment adviser cannot make a false statement without reasonable ground for believing it to be true as mandated in PFUTP Regulations. An investment adviser cannot sell products by promising profits to investors as was being done by PG in the present case. PG was falsely promising profits to investors knowing fully well that all investments in stocks, derivatives, commodity derivatives, etc. in respect of which it was offering investment advice are subject to market risk.

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

47. From the findings of the preliminary examination and the overall modus operandi discussed in this order, prima facie, it appears that PG was running a pre-meditated device, plan or scheme wherein, employees/ representatives of PG would lure innocent investors by falsely promising profits and then more money would be extracted from them by making them subscribe to additional packages, etc. PG by falsely promising profits was inducing the investors to deal in securities and was thereafter also charging unreasonable and arbitrary fee from them, thereby increasing its income at the expense of the best interests of its clients.

48. The above activities of PG viz., falsely promising profits, unfair dealings with clients by charging unreasonable and arbitrary fees, inappropriately creating a risk profile in order to categorize them in the high risk bracket and charging fees higher than the income/proposed investment of the clients are, prima facie, fraudulent and are commissions, contrivance and course of business in order to induce the clients to deal in securities and are covered under the definition of ‘fraud’ under Regulation 2(1)(c) of the PFUTP Regulations, which provides as under:

“(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 Profit Guru (Proprietor: Mr. Satish Shukla)

(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 …”

49. I also take note of some of 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, which are reproduced below:

SEBI Act, 1992 “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 “Prohibition of certain dealings in securities 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;

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

(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.

50. Thus, PG through its fraudulent activities/ dealings as discussed above, has prima facie violated the above mentioned provisions of Section 12A(a), (b) and (c) of the SEBI Act, 1992 and Regulations 3 (a), (b), (c), (d), 4(1) and 4(2)(k) of the PFUTP Regulations.

51. I note that a person acting as a securities market intermediary is expected to protect the interest of investors in the securities market in which he/she/it operates and it ill-behooves him to become a party to any market misconduct. Every market intermediary is required to maintain high standards of integrity, promptitude and fairness in the conduct of his business dealings, and not be motivated purely by prospects of financial gain. The intermediary should not abuse the certificate of registration granted to it, in any manner, for carrying out any non-genuine, deceptive or fraudulent acts. Under Regulation 15 (1) of the IA Regulations, an investment adviser shall act in a fiduciary capacity towards its clients. In order to maintain fiduciary relationship, one of the essential elements is to strictly adhere to the Code of Conduct for an investment adviser prescribed under the IA Regulations.

52. The relevant provisions of IA regulations are reproduced below:

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 16: Investment adviser shall ensure that: - …… (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: Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

(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: Investment adviser shall ensure that: - (a) All investments on which investment advice is provided is appropriate to the risk profile of the client;

Regulation 15(9): An investment adviser shall abide by Code of Conduct as specified in Third Schedule.

CODE OF CONDUCT FOR INVESTMENT ADVISER (Regulation 15(9) of IA Regulations)

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. ………. 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. ………….”

53. Looking at the activities and manner of operation of PG in the present case, which have been discussed in detail in the preceding paragraphs, I am of the prima facie view that PG Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

has failed to abide by the Code of Conduct on all counts mentioned above. I, therefore, find that PG while carrying out his activities as an investment adviser has, prima facie, violated the provisions of Regulations 13(a), 15(1), 16 (d), (e), 17(a), 21(1), 25(i) and (ii) read with 24(3) of IA Regulations and Clauses 1, 2, 6 and 8 of the Code of Conduct for investment advisers as mentioned in Schedule III read with regulation 15(9) of IA Regulations. In addition, PG has also violated the SEBI Circular CIR/OIAE/2014 dated December 18, 2014.

54. As a regulator of capital market, SEBI has a statutory duty to protect the interests of investors in securities and promote the development of, and to regulate, the securities market. Section 11 of the SEBI Act has empowered it to take such measures as it thinks fit for fulfilling its legislative mandate. IA Regulations have been formulated with the main objective of regulating such activities to safeguard the interests of investors and hence registration of such activities with SEBI has been made mandatory. IA Regulations inter alia seek to create a structure within which investment advisers will operate and also make them duly accountable for their investment advice by requiring investment advisers to comply with the relevant provisions of the IA Regulations. The same is imperative for the protection of interests of investors and to safeguard the integrity of the securities market.

55. Since the conduct of PG, mentioned above does not, prima facie, appear to be in the interest of investors and the securities market, therefore, urgent necessary action has to be taken against PG immediately, else it may lead to loss of investors’ trust in the securities market. Considering the facts and circumstances of the present matter and on the basis of prima facie findings, it is necessary to prevent PG from collecting any more fees from the public and lure innocent investors to avail its services under false / misleading commitment of return. I note that the website of PG is still active. Therefore, the probability of investors reaching PG through a website is high and the threat of investors getting lured to the registered advisory services is still looming large, and imminent. Services offered by PG are not in conformity with the IA regulations and the PG is providing service in a fraudulent way. Therefore, the present and prospective investors need to be protected from such services

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

urgently. Further, as per the information available on website, investors can become prey to the different packages offered by PG.

56. Thus, considering the facts and circumstances of this case and such a fraudulent scheme, plan, device and artifice as, prima facie, found in this case, I am convinced that this is a fit case where, pending detailed examination, effective and expeditious preventive action is required to be taken by way of ad interim ex parte order against PG for preventing it from collecting funds and indulging in investment advisory services; to protect the interests of investors and preserve the safety and integrity of the securities market. Such action needs to be taken to prevent any further harm to investors. In order to protect prospective investors and present investors from making further payment to the bank accounts of PG/its proprietor Mr. Satish Shukla, credit into bank accounts through any channels needs to be stopped.

57. It is pertinent to mention that a number of complaints have been filed against PG alleging perpetration of fraud on the clients and in almost all the complaints, the complainants have claimed refund of the money given by them to PG. One of the directions that can be passed against PG, subject to the adjudication of the allegation on the merits in the final order, under Sections 11(1), 11(4), 11B and 11D of SEBI Act is that of direction to refund the money collected by Profit Guru from their clients. With the initiation of quasi-judicial proceedings, it is possible that PG may divert the money collected from its clients. The same may result in defeating the effective implementation of the direction of refund, if any, to be passed after deciding the matter on merits. Non-interference by the Regulator at this stage would therefore result in irreparable injury to interests of the securities market and the investors. It therefore becomes necessary for SEBI to take urgent steps of stopping the debits from the bank accounts of Profit Guru and its proprietor Mr. Satish Shukla.

ORDER:

58. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11(1), 11(4), 11B and 11D read with Section 19 of the SEBI Act and Regulation 35 of Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

Securities and Exchange Board of India (Intermediaries) Regulations, 2008 hereby direct by way of this interim ex-parte order, the following directions: -

58.1. Profit Guru and its proprietor Mr. Satish Shukla (SEBI Registration Number: INA000003510 and PAN: BLWPS1911G) are directed: -

58.1.1. to 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, until further orders;

58.1.2. not to access the securities market and buy, sell or otherwise deal in securities or associate themselves with securities market, either directly or indirectly, in any manner whatsoever, until further orders; If Profit Guru / its proprietor Mr. Satish Shukla have any open position in any exchange traded derivative contracts, they are permitted to close out/ square off such open positions within one month from the date of receipt/knowledge of this order.

58.1.3. not to divert any funds raised from investors, kept in bank account(s) and/or in their custody until further orders;

58.1.4. to 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.

58.1.5. 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

58.2. Banks including Axis Bank and State Bank of India, are directed to ensure that, without the permission of SEBI, until further orders, no debits/withdrawals are made from and Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

no credits are made to, the bank accounts held by Profit Guru and its proprietor Mr. Satish Shukla (PAN: BLWPS1911G), jointly or severally. The Banks are also directed to ensure that all the above directions are strictly enforced.

58.3. Any person while working under PG/its proprietor Mr. Satish Shukla or under its instructions as employee or otherwise, shall cease and desist from undertaking the activity of investment advisory services, including the activity of acting and representing through any media (physical or digital) as an investment advisor, directly or indirectly, till further orders.

58.4. The Depositories are directed to ensure that till further directions no debits are made in the demat accounts of PG, or its proprietor Mr. Satish Shukla, held jointly or severally.

58.5. The Registrar and Transfer Agents are also directed to ensure that till further directions the securities, including Mutual Funds held in the name of PG, or its proprietor Mr. Satish Shukla, jointly or severally, are not transferred or redeemed.

59. This Order is without prejudice to the right of SEBI to take any other action that may be initiated against Profit Guru and its proprietor Mr. Satish Shukla in accordance with law.

60. The prima facie observations contained in this Order, pending enquiry, are made on the basis of the material available on record. In this context, Profit Guru / its proprietor Mr. Satish Shukla 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.

61. The above directions shall take effect immediately and shall be in force until further orders.

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)

62. A copy of this order shall be served upon Profit Guru and its proprietor Mr. Satish Shukla, Banks, Stock Exchanges, Registrar and Transfer Agents and Depositories for necessary action and compliance with the above directions.

-Sd- Date: February 06, 2020 MADHABI PURI BUCH Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Interim Order in the matter of Profit Guru (Proprietor: Mr. Satish Shukla)