Order against Sameer S. Joshi prop. Shreesurya Investments, sub broker

ORDER Under Section 11(1), 11(4), 11B and 11D of the Securities and Exchange Board of India Act, 1992 in respect of Mr. Sameer S. Joshi, Proprietor, Shreesurya Investments (PAN ABSPJ5397C and Mr. Sameer S. Joshi (HUF): AAPHS5352A)

1. Mr. Sameer S. Joshi, Proprietor, Shreesurya Investments ("Mr. Sameer Joshi") was a registered Sub-broker of BSE Limited having Registration number INS013981613 from June 19, 2007 to December 27, 2013. Mr. Sameer Joshi was also a Sub-broker of the National Stock Exchange of India Limited having Registration number INS235376014 from May 06, 2008 to November 01, 2013. Mr. Sameer Joshi was affiliated to the stock broker, M/s Kisan Ratilal Choksey Shares and Securities Private Limited ("Stock Broker").

2. Securities and Exchange Board of India ("SEBI") received several complaints during the year 2013 against Mr. Sameer Joshi, inter alia, alleging the following: i. Promised the investors in Nagpur to double their money within 15-28 months or pay 50% interest rate per annum on quarterly basis, and also providing free foreign trips ii. Funds were collected by the group through agents, chartered accountants and lawyers. iii. These amounts were deposited in the HUF account of the Mr. Sameer Joshi or Shreesurya Investments' Account with Axis Bank. iv. Shreesurya Investments collected more than Rs. 5000 crores from 6000 investors. v. Shreesurya Investments neither paid interest nor repaid the principal amounts.

3. Upon preliminary enquiry by SEBI, it was observed that Mr. Sameer Joshi by misusing the certificate of registration granted as Sub-broker, solicited and collected money from the members of public promising them high returns. As a Sub-broker, Mr. Sameer Joshi was also an agent of the Stock broker. It was also observed that Mr. Sameer Joshi indulged in fund-based activities involving his personal financial liability by virtue of collection of money.

4. As the aforesaid activities of Mr. Sameer Joshi were prima facie in violation of the provisions of the SEBI Act, 1992 ("SEBI Act"), Securities Contracts (Regulation) Rules, 1957 ("SCRR"), the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 ("Brokers Regulations") and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 ("PFUTP Regulations"), SEBI passed an ad interim ex-parte order dated January 20, 2015 ("Ex-parte Order") against Mr. Sameer Joshi with the following directions: (i) "prohibited Mr. Sameer S. Joshi from mobilizing or pooling funds from its clients, other general investors or public or any other unregistered activity, in whatever form; (ii) directed Mr. Sameer S. Joshi to immediately withdraw and remove all advertisements, representations, literatures, brochures, materials, publications, documents, websites, etc. in relation to the promising high returns or any unregistered activity in the securities market; (iii) directed Mr. Sameer S. Joshi to refund the monies so collected from his clients and other investors in the various schemes along with income, profits or returns promised to them under such schemes or interest at the rate of 10% per annum, whichever is higher, from the date of investment till the date of refund, within a period of seven days from the date of this order (i.e., by January 27th, 2015) and submit a repayment report to SEBI in the following format:

S. No. Name of PAN of Address of Refund Details Client / Client / Client/ From To Amount Investor Investor Investor Cheque No./ Name of the Cheque No./ Demand Draft/ Bank Demand Draft/ NEFT details NEFT details (iv) prohibited Mr. Sameer S. Joshi from transferring the funds/deposits mobilised from the clients or other investors or from disposing of or alienating any asset that has been created from the funds/deposits received from their clients or other investors for purposes other than refund as directed hereinabove; (v) restrained Mr. Sameer S. Joshi (PAN: ABSPJ5397C) from buying, selling or dealing in the securities market, either directly or indirectly, in any manner whatsoever, till further directions."

5. The said ex-parte order provided that Mr. Sameer Joshi may file his objections, if any, within twenty one (21) days from the date of receipt of the said interim order. The order further provided that Mr. Sameer Joshi may avail an opportunity of personal hearing before SEBI on a date and time to be fixed on a specific request in writing.

6. Since Mr. Sameer Joshi was in judicial custody, the ex-parte order was sent to him vide letter dated January 21, 2015, through the Superintendent, Nagpur Central Prison, Nagpur. The same was duly acknowledged by Mr. Sameer Joshi.

7. In response, Mr. Sameer Joshi vide letter dated February 10, 2015 stated as under: "In this context, I wish to state that I am lodged in Central Jail, Nagpur since more than a year. Besides all the records pertaining to the matter and the office premises are sealed and I have no access to any papers. In view of the above reason and in the interest of justice, I will not be able to furnish any reply till I am released and sufficient time is provided so as to enable me to give a proper reply". As per the information furnished by the Economic Offences Wing, Nagpur, it is observed that a First Information Report was registered against Mr. Sameer Joshi and his wife Ms. Pallavi Joshi on September 14, 2013 under the Maharashtra Protection of Investors Deposit Act, 1999.

8. Thereafter, an opportunity of personal hearing before me was granted to Mr. Sameer Joshi on May 12, 2015 through a notice of hearing dated March 30, 2015. The notice of personal hearing was served through the Superintendent of Jail, Nagpur, vide letter dated March 30, 2015. However, Mr. Sameer Joshi did not avail the opportunity of personal hearing. Another opportunity of personal hearing was granted to Mr. Sameer Joshi on July 01, 2015 through a notice of hearing dated June 05, 2015 to appear before SEBI in person or through his authorised representative. The notice of personal hearing was served through the Superintendent of Jail, Nagpur, vide letter dated June 05, 2015. Neither Mr. Sameer Joshi nor his authorised representative attended the personal hearing or filed any reply till date.

9. Considering that no reply has been received from Mr. Sameer Joshi, despite sufficient opportunities granted to him and also considering the fact that Mr. Sameer Joshi failed to avail the opportunity of personal hearing, I am constrained to proceed on the basis of the material available on record against Mr. Sameer Joshi.

10. I shall now proceed to deal with the charges alleged against Mr. Sameer Joshi. In the instant case, the issue for consideration is whether Mr. Sameer Joshi has indulged in fund based activities by virtue of collection of money, in violation of Section12(1) of the SEBI Act, Rule 8(3)(f) of the SCRR and Clauses A(1), (2) and D(4) of the Code of Conduct for Sub-brokers read with Regulation 15 of the Stock Brokers and Sub-brokers Regulations, Section 12A (a) (b) and (c) of the SEBI Act and Regulation 3 (b), (c) and (d) and Regulation 4(1) and 4(2) (k) of the PFUTP Regulations.

11. On an examination of the material available on record, the following are observed: i. During the relevant period, Mr. Sameer Joshi was a SEBI registered Sub-broker (details are mentioned at paragraph 1) affiliated to the Stock broker, M/s Kisan Ratilal Choksey Shares and Securities Pvt. Ltd.

ii. Apart from Shreesurya Investments, Mr. Sameer Joshi has floated 10 other companies viz., "Shreesurya In-tech Pvt. Ltd., Shreesurya Softdrinks Pvt. Ltd., Shreesurya Infra Projects Pvt. Ltd., Shreesurya Diary and Farm Pvt. Ltd., Shreesurya Cafe Retail Pvt. Ltd., Shreesurya Oil and Extractions Pvt. Ltd., Shreesurya Media Network Pvt. Ltd., Shreesurya Wealth Risk Advisory Pvt. Ltd., Shreesurya Supermarkets Pvt. Ltd., Shreesurya Dreams Destinations Pvt. Ltd." As per the information received and details available at the website of the Ministry of Corporate Affairs, Mr. Sameer Joshi and one Mr. Manoj Tatwadi together hold 100% voting rights in Shreesurya In-tech Limited and are also its directors since inception. Mr. Sameer Joshi and his wife Ms. Pallavi Joshi have 100% voting rights in each of the remaining companies and are directors of the said companies since inception.

iii. Mr. Sameer Joshi had mobilised money from depositors/investors as fixed deposits, recurring deposits, etc. These are shown as 'unsecured loans' in the balance sheet of Shreesurya Investments. Funds mobilised from various investors are as under: Table 1 Sl. No. As on No. of investors Total amount collected (Rs.) 1 March 31, 2010 934 21,30,27,957 2 March 31, 2011 1762 42,02,28,228 3 March 31, 2012 1930 56,73,35,157 iv. Mr. Sameer Joshi, also operated various schemes as shown below. For example, as per one of the schemes “FDR Scheme doubles in 24 months”, with a minimum investment of `50,000/-, the investor has the option of receiving quarterly interest of 12.5% or half yearly of 25%.

Table 2 - Schemes of Shreesurya Investments Sl. No. Name of the scheme Investment Options Amount to be received amount (````) 1 FDR Scheme doubles in Minimum Quarterly (12.5%) and half Double of the amount 24 months 50,000 yearly (25%) Interest may be invested obtained as option 2 FDR Scheme doubles in 1,00,000 - No quarterly interest and Double of the amount 19 months 5,00,000 premature withdrawals invested 3 FDR Scheme doubles in 6,00,000 - No quarterly interest and Double of the amount 18 months 10,00,000 premature withdrawals invested 4 FDR Scheme doubles in 11,00,000 and No quarterly interest and Double of the amount 17 months above premature withdrawals invested 5 FDR Scheme doubles in 1,00,000 and Premature notice period for 6 Double of the amount 30 months above months invested 6 FDR Scheme doubles in 1,00,000 and Nil Principal +15% interest 6 above on Principal Months 7 FDR Scheme doubles in 1,00,000 and Nil Principal +6% interest 3 months above on Principal v. Mr. Sameer Joshi issued to the investors/clients deposit receipts described as "Promissory note". The details of the said "Promissory note' issued to one of its investors/clients by Mr. Sameer Joshi is reproduced hereunder: "Shreesurya Investment herewith promises to pay to (name of investor) or Nominee a sum of Rs. 50,000/- (Rupees Fifty Thousand Only) per quarter as interest in Deposit of Rs. 4,00,000/- (Rupees Four lac only) accepted in the name said as (name of investor) w.e.f. August 21, 2012 (Date of Deposit) for a period of 24 months and further promises to pay Rs. 4,00,000/- (Rupees Four lac only) on the date August 21, 2014 (Maturity Date) as an amount of Deposits".

vi. There are eight bank accounts opened in the names of Shreesurya Investments and Mr. Sameer Joshi with his PAN, i.e. ABSPJ5397C.

vii. The credits in these bank accounts for the period April 01, 2008 to September 30, 2014 amount to `30 crores (approximately). Out of these, there were 135 instances of cash deposits amounting to `3.05 crores.

12. In the light of the facts mentioned above and also from the complaints by the clients/investors of Mr. Sameer Joshi, it is clearly established that Mr. Sameer Joshi was collecting money from the public by misusing the trade name granted as a Sub-broker. This collection of money gives rise to pecuniary liability to those from whom the money has been collected by Mr. Sameer Joshi. It is noted that Rule 8 (3) (f) of SCRR clearly prohibits such activities.

12.1. In this context, Rule 8 (3) (f) of SCRR which deals with such pecuniary liability is reproduced hereunder for reference: “Qualifications for membership of a recognised stock exchange. 8. The rules relating to admission of members of a stock exchange seeking recognition shall inter alia provide that: (3) No person who is a member at the time of application for recognition or subsequently admitted as a member shall continue as such if – (f) he engages either as principal or employee in any business other than that of securities or commodity derivatives except as a broker or agent not involving any personal financial liability, provided that - .................................................” 12.2. As per Rule 8 (3) (f) of SCRR, a member of the Stock Exchange is prohibited from engaging in any business other than that of securities or commodity derivatives except as a broker or agent not involving any personal financial liability. It is noted that the Sub-brokers are not members of the stock exchanges. However, they are agents of the Stock broker. Therefore, the said rule is applicable to the Sub-broker as well. In view of the same, I find that Mr. Sameer Joshi has violated rule 8 (3) (f) of SCRR as Sub-broker.

13. It is noted from the abovementioned facts at paragraph 11(v) that Mr. Sameer Joshi had floated various schemes. By floating such schemes, it is alleged that Mr. Sameer Joshi violated Section 12A (a) (b) and (c) of the SEBI Act read with Regulations 2(1)(c), 3 (b), (c), (d), 4(1) and 4(2) (k) of the PFUTP Regulations.

13.1.The provisions, the contravention of which have been alleged in this case are reproduced hereunder for reference:

The SEBI Act, 1992 - "Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. 12A. No person shall directly or indirectly - (a) 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 this Act or the rules or the regulations made there under; (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 recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made there under;" The PFUTP Regulations, 2003 Definition of “fraud” – 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; (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; ” "3. Prohibition of certain dealings in securities No person shall directly or indirectly— (a)… (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." "4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities.

(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:— (k) an advertisement that is misleading or that contains information in a distorted manner and which may influence the decision of the investors; "

13.2. It is noted from the investor complaints and the schemes that Mr. Sameer Joshi had misused his status as a Sub-broker and solicited and collected funds and deposits from them through misrepresentation and allurement of high returns. In view of the same, I find that Mr. Sameer Joshi has clearly devised a scheme which is 'fraudulent' as defined in Regulation 2(1)(c) of the PFUTP Regulations. It is therefore clear that Mr. Sameer Joshi has acted in fraudulent and deceitful manner in violation of Section 12A (a) (b) and (c) of the SEBI Act and Regulation 3 (b), (c) and (d) and Regulation 4(1) and 4(2) (k) of the PFUTP Regulations.

14. Mr. Sameer Joshi as a Sub-broker at the relevant time was duty bound to follow the conditions of granting of certificate of registration and also to abide by the code of conduct prescribed under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992. The relevant provisions are reproduced below: The SEBI Act, 1992 Registration of stock brokers, sub-brokers, share transfer agents, etc 12. (1) No stock broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market shall 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 this Act:

The SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 Code of Conduct for Sub-Brokers " A. General (1) Integrity: A sub-broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all investment business. (2) Exercise of due Skill and Care: A sub-broker, shall act with due skill, care and diligence in the conduct of all investment business... D. Sub-Brokers vis-a vis Regulatory Authorities ………………………………………………………………………………… (4) Manipulation: A sub-broker shall not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to disturbing market equilibrium or making personal gains." Mr. Sameer Joshi by misusing the status as Sub-broker solicited and collected money from the members of public through various fraudulent schemes as detailed at paragraph 11(iv) promising them high returns. Hence, I find that Mr. Sameer Joshi failed to maintain high standards of integrity, promptitude and fairness prescribed for a Sub-broker, therefore violated Section 12(1) of the SEBI Act read with Clauses A(1), (2) and D(4) of the Code of Conduct for Sub-brokers read with Regulation 15(1)(b) of the Brokers Regulations.

15. In view of the non-repayment to his clients/investors by Mr. Sameer Joshi, he is liable to refund the money so collected from his clients and other investors in the various schemes along with income, profits or returns promised to them under such schemes.

16. It is also noted that the Mr. Sameer Joshi failed to comply with the directions issued by SEBI in the ex-parte order dated January 20, 2015. Mr. Sameer Joshi has not submitted the report as directed in the ex-parte order indicating refund of monies collected from his clients and other investors under various schemes. However, considering the fact that he is in judicial custody, I am of the view that a fresh period of ninety (90) days for repayment of monies collected from the clients from the date of this order can be granted to Mr. Sameer Joshi.

17. SEBI has been entrusted with the important mandate of protecting investors and safeguarding the integrity of the securities market. In this regard, necessary powers have been conferred upon it under the securities laws. It is, therefore, necessary that SEBI exercises these powers firmly and effectively to insulate the market and its investors from the fraudulent actions of any of the participants in the securities market, thereby fulfilling its legal mandate. A basic premise that underlines the integrity of securities market is that persons connected with securities market conform to high standards of transparency, good governance and ethical behaviour prescribed in securities laws and do not resort to fraudulent activities. In view of the gravity of the violations perpetrated by Mr. Sameer Joshi as brought in the foregoing paragraphs, I am of the opinion that persons such as Mr. Sameer S. Joshi should not be allowed to have access to the securities market in view of the possible danger to the investors at large.

18. In view of the foregoing, I, in exercise of powers conferred upon me by virtue of Section 19 read with Sections 11(1), 11(4), 11B and 11D of the SEBI Act do hereby pass the following directions : a) Mr. Sameer S. Joshi, Prop. Shreesurya Investments (PAN ABSPJ5397C and Mr. Sameer S. Joshi (HUF): AAPHS5352A) are prohibited from mobilizing or pooling any fresh funds from its clients, other general investors or members of public in whatever form;

b) Mr. Sameer S. Joshi, Prop. Shreesurya Investments (PAN ABSPJ5397C and Mr. Sameer S. Joshi (HUF): AAPHS5352A) are directed not to, directly or indirectly, access the securities market, and are further restrained and prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner, from the date of this Order, till the expiry of five (5) years from the date of completion of refunds to investors as directed above.

c) Mr. Sameer S. Joshi, Prop. Shreesurya Investments (PAN: ABSPJ5397C) shall refund the monies so collected from his clients and other investors in the various schemes along with income, profits or returns promised to them under such schemes or interest at the rate of 10% per annum, whichever is higher, from the date of investment till the date of refund, within a period of ninety (90) days from the date of this order and submit a repayment report to SEBI in the following format as certified by two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution: S. No. Name of PAN of Address of Refund Details Client / Client / Client/ From To Amount Investor Investor Investor Cheque No./ Name of the Cheque No./ Demand Draft/ Bank Demand Draft/ NEFT details NEFT details d) Mr. Sameer S. Joshi, (PAN ABSPJ5397C) is permitted to sell the assets and the proceeds shall be kept in an interest bearing escrow account to be opened in a scheduled bank and the said proceeds shall be used for the sole purpose of making the repayments including interest, as directed above. e) Mr. Sameer S. Joshi, (PAN ABSPJ5397C) shall provide a full inventory of all his assets and properties and details of all his bank accounts, de-mat accounts and holdings of shares/securities, if additionally held in physical form.

19. This order shall come into force with immediate effect. The stock exchanges and the depositories are directed to ensure that the above directions are strictly enforced.

January 08, 2016 S. RAMAN Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA