M/S Trend Market Advisory Services vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision : 21.09.2022 Misc. Application No. 1035 of 2022 And Appeal No. 567 of 2022 1. C. Paranitharan 71, Muthalamman, Koil Street, Tirumangalam, Madurai - 625 706. 2. M/s Capital Target Financials 683, PTN Complex, 2nd Floor, Madurai Rd, Tirumangalam - 625 706. 3. C. Muralitharan 71, Muthalamman, Koil Street, Tirumangalam, Madurai - 625 706. .....Appellants Versus Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent Mr. Malhar Zatakia, Advocate with Ms. Disha Parekh and Ms. Sharayu Kate, Advocates i/b NDB Law for the Appellant. Mr. Manish Chhangani, Advocate with Ms. Samreen Fatima, Advocate i/b The Law Point for Respondent. 2 AND Misc. Application No. 1036 of 2022 And Appeal No. 568 of 2022 1. M/s Trend Market Advisory Services 683, PTN Complex, 2nd Floor, Madurai Rd, Tirumangalam - 625 706. 2. C. Muralitharan 71, Muthalamman, Koil Street, Tirumangalam, Madurai - 625 706. 3. C. Paranitharan 71, Muthalamman, Koil Street, Tirumangalam, Madurai - 625 706. 4. NSK Chithanathan 20/22, Muthalamman, Koil Street, Tirumangalam, Madurai - 625 706. .....Appellants Versus Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent Mr. Malhar Zatakia, Advocate with Ms. Disha Parekh and Ms. Sharayu Kate, Advocates i/b NDB Law for the Appellant.

Mr. Manish Chhangani, Advocate with Ms. Samreen Fatima, Advocate i/b The Law Point for Respondent. CORAM : Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member Per : Justice Tarun Agarwala, Presiding Officer (Oral) 3 1. Both the appeals are against a common issue and are also interconnected and are being taken up together. Appeal no. 567 of 2022 has been filed by C. Paranitharan who is the proprietor of M/s. Capital Target Advisory Services and partner in M/s. Capital Target Financials. Appeal no. 568 of 2022 has been filed by M/s Trend Market Advisory Services is a partnership firm in which C. Paranitharan is one of the partners. C. Paranitharan has filed appeal against the order dated July 5, 2022 passed by the Whole Time Member ('WTM' for short) of the Securities and Exchange Board of India ('SEBI' for short) and M/s. Trend Market Advisory Services has filed the appeal against order dated July 7, 2022 passed by the WTM of SEBI. 2. For facility, the facts enumerated in Appeal no. 567 of 2022 are being taken into consideration. The show cause notice alleged that the appellants were providing investment advisory services without registration.

The WTM after considering the material evidence on record and after considering the replies found that the appellants were engaged in giving advice relating to investing in, purchasing, selling or otherwise dealing in securities or investment products through its website in lieu of consideration without getting themselves 4 registered as an investment advisor under the SEBI (Investment Advisers) Regulations, 2013 ('IA Regulations' for short). The WTM found that the appellants violated Section 12(1) of the SEBI Act, 1992 which provides that the investment adviser shall not buy, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under the Act. The WTM further found that the appellant failed to obtain a certificate of registration as mandated under Regulation 3(1) of the IA Regulations which provides that no person shall act as an investment adviser unless he has obtained a certificate of registration from SEBI and conducts activities in accordance with the provisions of IA Regulations.

The WTM accordingly issued the following directions:- 3. Similar directions were issued in the appeal of M/s. Trend Market Advisory Services. 4. We have heard Shri Malhar Zatakia, the learned counsel assisted by Ms. Disha Parekh and Ms. Sharayu Kate, the learned counsel for the appellants and Shri Manish Chhangani assisted by Ms. Samreen Fatima, the learned counsel for the respondent. 5. The learned counsel for the appellants conceded that they were carrying on an investment advisory services and were totally unaware that they are required to take a 8 registration under the IA Regulations. It was contended that the appellants were providing services since 2008 much prior to the enforcement of the regulations which came in 2013. It was also stated that when show cause notice was issued the appellants realized that they were not registered under IA Regulations and accordingly stopped their services. It was, thus, contended that there was no intention to defraud the investors and that in the absence of any complaint from anyone seeking advice from them and in the absence of mens rea, the directions issued by WTM was harsh and disproportionate to the misconduct.

6. The learned counsel for the appellants upon taking instructions from the appellants contended that in the given facts and circumstances of the case the appellant will comply with the directions of the WTM to refund the amount to the investors. 7. In the light of the aforesaid, we find that the appellants fairly conceded that they were carrying on advisory services since 2008 when there was no restriction under the SEBI Act and its regulations with regard to registration as an investment adviser. The stipulation of having a registration came only when the IA Regulations came into effect in 2013 and it is 9 only thereafter the requirements of getting itself registered arose. 8. In view of the aforesaid, coupled with the fact that nothing has come on record to indicate that the appellants have defrauded its investors and, in the absence of any evidence of any fraud, we dispose of the appeal with the following directions:- 9. The appeal is partly allowed in terms of the aforesaid directions. Miscellaneous applications are disposed of. 10. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order.

Certified copy of this order is also available from the Registry on payment of usual charges. Justice Tarun Agarwala Presiding Officer Ms. Meera Swarup Technical Member RAJALA Digitally signed by RAJALAKSHMI 21.09.2022 KSHMI HDate: