Order in the matter of Cypress Money Investment Advisor

WTM/GM/IMD/15/JUNE/2017 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under Sections 11(1), 11 (4), 11B and 11D of the Securities and Exchange Board of India Act, 1992, read with Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 and Securities and Exchange Board of India (Research Analyst) Regulations, 2014 in respect of M/s Cypress Money Investment Adviser (Pan: AAKFC7589G) and its partners, Mr. Anubhav Kandpal (PAN: AAKFC7589G), Ms. Saumya Kala (PAN: CDXPK7038J) and Ms. Suman Kala (PAN: DOGPK1878M).

1. Securities and Exchange Board of India (“SEBI”) received a complaint on June 19, 2016 alleging that Cypress Money Investment Advisor (“Cypress Money”) is providing trading tips and investment advice and was soliciting clients under various plans.

2. As a matter of preliminary enquiry, SEBI, vide letter and email dated August 22,2016, sought the following information from Cypress Money, viz.- a) Registered/corporate addresses of Cypress Money along with the phone numbers, legal structure and PAN; b) Name, address, PAN and phone numbers of all of its promoters/directors/partners/proprietor; c) List of all securities/investment related activities undertaken by Cypress Money; d) Since when Cypress Money is in the business of investment advisory/research analyst; e) The following details year wise in a tabular format, viz:- i. Package/services offered by Cypress Money to its clients; ii. Number of clients from whom fee was collected during the year; iii. Total amount of money collected from the aforesaid clients as fees during the year;

f) List of clients and fee charged for various products/services offered by Cypress Money; g) Is Cypress Money registered with SEBI or any other regulators in India? If yes details; h) A copy of the audited annual accounts for previous financial years; i) A copy of accounts statements of all its bank accounts for the last three financial years; However, the letter returned undelivered to SEBI.

3. The entity replied vide email dated August 26, 2016 stating that they would provide the required documents latest by September 05, 2016.

4. Thereafter, the entity vide email dated September 05, 2016 provided the following information. a. Addresses, PAN and phone no. of Cypress Money and all its partners; b. Details of package offered and fees collected from clients for these services; c. IT return for AY 2016-17 for Cypress Money;

d. Bank account statement of Cypress Money for the period from January 01, 2016 to August 31, 2016; e. Partnership deed of Cypress Money; f. IT return and bank account statements of the partners of Cypress Money; g. Copy of audited annual accounts of Cypress Money;

5. While submitting the above, the following was also stated in the letter: a) The entity is in the business of investment advisory/research analyst since October 25, 2015; b) The entity is not registered with SEBI or any other regulators in India but they would be going for fresh registration as investment adviser.

6. Cypress Money subsequently submitted their application for registration as an investment adviser with SEBI on September 16, 2016.

7. On an examination of the material available on record i.e. information available on the website of Cypress Money (http://cypressmoney.com) and reply received from Cypress Money, it is observed that- i. Cypress Money is a partnership firm incorporated on October 25, 2015 at Mumbai with its office at “Office no.-420 (419), New Sonal Link Industrial Estate, Building No.2, B Wing, Linking Road, Malad West-400064”. ii. Cypress Money has 3 partners, viz., Mr. Anubhav Kandpal (active partner), Ms. Saumya Kala (active partner) and Ms. Suman Kala (sleeping partner).

iii. It is mentioned on the website that “CypressMoney is India’s best stock advisory firm backed by Professional research team of Chartered Market Technicians (CMT). We provide Investment advice in Indian equities & derivatives to Individual investors, HNIs, brokers, corporate players. We perform research on stocks from short term, midterm to long term investment horizon. We are here to help our prestigious clients to maximize their returns from trading and investing in Indian stock market by offering outstanding research and advice…..CypressMoney is one of the few organizations providing research and information on Indian Equity Market mainly based on Technical and Fundamental Analysis and enjoys a strong reputation amongst investors, brokers and researchers. Our team is highly skilled with experienced analysis. Our efforts are to provide you more & more profit in every trade.” iv. The entity is in the business of investment advisory/research analyst since October 25, 2015 as per their own submission. They have mentioned a pricing schedule for their services with its monthly, quarterly and yearly rates for equity market, futures market, options market and commodity market packages which has been summarized as under:- Name of the package Fee charged (Rs.) 3Months 6 Months 1 Year Stock Rich 19,900 29,900 39,900 Future Plus 19,900 29,900 39,900 Trend Rider 19,900 29,900 39,900 HNI Pack 49,900 74,900 99,900 v. During the period from October 2015 to August 2016, Cypress Money provided services to 90 clients and collected a total of Rs. 14,69,581 as fees from these clients. The details of the same are as below:

Name of the package No of Clients Stock Rich 41 Future Plus 46 Trend Rider 2 HNI Pack 1

8. From the analysis of the available information, it is, prima facie, observed that Cypress Money and its partners are engaged in providing investment advisory services to investors on payment of fees as discussed in the preceding paragraphs, which fall under the definition of “investment adviser” as defined by Regulation 2(m) of the SEBI Investment Advisers Regulations, 2013 which reads as under:

“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;”.

9. Further, it is, prima facie, observed that Cypress Money and its partners are offering stock recommendations and technical and fundamental calls, as observed from their website, as discussed in previous paragraphs, which fall under the definition of “research analyst” as defined by Regulation 2(u) of the SEBI (Research Analyst) Regulations, 2014,which reads as under: “research analyst” means a person who is primarily responsible for,- i. Preparation or publication of the content of the research report; or ii. Providing research report; or iii. Making “buy/sell” hold recommendation; or iv. Giving piece target; or v. Offering an opinion concerning public offer, with respect to securities that are listed or to be listed in a stock exchange, whether or not any such person has the job title of ’research analyst’ and includes any other entities engaged in issuance of research report or research analysis.”

10. In order to ensure that no investor is defrauded, it is imperative that any person carrying out investment advisory activities has to necessarily obtain registration from SEBI and conduct its activities in accordance with the provisions of SEBI Regulations. Section 12(1) of the SEBI Act, 1992 reads “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:” Further, as per Regulation 3(1) of the SEBI Investment Advisers Regulations, the registration of the investment advisers is mandatory. It provides that, “On and from the commencement of these regulations, no person shall act as an investment adviser or hold itself out as an investment adviser unless he has obtained a certificate of registration from the Board under these regulations”.

11. In this context, it is noted that Cypress Money and its partners are not registered with SEBI in any capacity, neither as an investment advisor or research analyst or portfolio manager nor as a broker or sub-broker affiliated to any brokers and the characteristics and features of the business activity carried out by Cypress Money as discussed in the preceding paragraphs, prima facie, lead to the conclusion that Cypress Money is providing services of an investment adviser as defined in Regulation 2(m) of the SEBI (Investment Advisers) Regulations, 2013 (IA Regulations) and the services of a research analyst as defined in Regulation 2(u) of the SEBI (Research Analysts) Regulations, 2014 (RA Regulations).

12. In my view, an unregistered investment advisor/ Research Analyst, like Cypress Money can put investors at great risk by misleading them. Further in case of default by Cypress Money in meeting of its obligation to investors, the normal remedies available to investors while dealing with SEBI registered intermediary such as invoking the grievance redressal mechanism, referring the matters to appropriate forums such as arbitration etc. are not available in this case which can put investors at peril. Thus, the activities of Cypress Money are, prima facie, in violation of 12(1) of SEBI Act,1992 read with Regulation 3 of the IA Regulation and Regulation 3 of the RA Regulation.

13. 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 and RA 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.

14. Therefore, in order to ensure that Cypress Money does not collect any more funds from the public and indulge in unauthorized investment advisory or research analyst activities until full facts and materials are brought out, it becomes necessary for SEBI to take urgent preventive action. In light of the same, I find that there is no other alternative but to take recourse through an ad interim ex-parte order against Cypress Money and its partners, Mr. Anubhav Kandpal, Ms. Saumya Kala and Ms. Suman Kala, for preventing them from collecting funds and indulging in unauthorized investment advisory and research analyst activities without obtaining registration from SEBI in accordance with the law.

15. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11(1), 11(4)(b), 11B and 11D read with Section 19 of the SEBI Act, 1992, hereby issue by way of this ex-parte ad-interim order, the following directions – i. Cypress Money investment (PAN: AAKFC7589G) and its partners, Mr. Anubhav Kandpal (PAN:BYMPK2765H), Ms. Saumya Kala (PAN: CDXPK7038J), and Ms. Suman Kala (PAN: DOGPK1878M), are directed to:- a. cease and desist from acting as an investment advisor or research analyst and cease to solicit or undertake such activity or any other activities in the securities market, directly or indirectly, in any matter whatsoever; b. not to divert any funds raised from investors, kept in bank account(s) and/or in their custody; c. immediately withdraw and remove all advertisements, representations, literatures, brochures, materials, publications, documents, websites, etc. in relation to their investment advisory and research analyst activity or any other unregistered activity in the securities market.

16. This Order is without prejudice to the right of SEBI to take any other action that may be initiated against Cypress Money and its aforementioned partners in accordance with law.

17. This Order shall be treated as a show cause notice and M/s. Cypress Money Investment advisor and its aforementioned partners may show cause as to why the investment plans and existing schemes identified in this Order should not be held as "Investment Advisory Services” and “Research analyst Services” in terms of respective Regulations, and why appropriate directions, under Section 11 and 11B of the SEBI Act, 1992 and relevant SEBI Rules/Regulations including directions, prohibiting them from buying, selling or otherwise dealing in securities market, either directly or indirectly, in any manner whatsoever, for a particular period and to refund the amount collected from the investors/clients/partners for its existing schemes should not be issued against them.

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

19. The prima facie observations contained in this Order are made on the basis of the material available on record i.e. information available on the website of Cypress Money and the reply received from Cypress Money. In this context, Cypress Money or its partners, may, within 21 days from the date of receipt of this Order, file their reply, 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.

Date: June 1, 2017 G MAHALINGAM Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA