Ignorance of the law cannot be used as an excuse to consider unauthorized activities within the provision of law -THE SECURITIES AND EXCHANGE BOARD OF INDIA
Securities and Exchange Board of India received several complaints against M/s. Cash Cow Broking & Advisory Solutions and various allegations that the cash cow is engaged in ‘investment advisory services’ without having proper registration for it under SEBI Act, 1992 and “IA Regulations, 2013” receiving these complaints an examination was conducted against cash cow company by ANANTA BARUA WHOLE TIME MEMBER in application no -WTM/AB/WRO/WRO/14741/2021-22.
In the investigation it was found that the firm was engaged in providing advisory services about stocks, commodities, currency, Agri, etc., research is based upon fundamental & technical analysis of all counters, scripts, & indexes. And other advisory services for which the firm does not have validation and various complaints were made against the firm and various allegations that that Cash Cow had promised that they will get good returns from the market and transaction were also recorded and found out that company received funds in its bank accounts and has mobilized a huge amount of money through the website.
A show-cause notice sends to the noticees alleging that noticees have carried out investment advisory activities without obtaining a certificate of registration from SEBI. And have violated Section 12(1) of SEBI Act, 1992 read with Regulation 3(1) of the IA Regulations, 2013 and asked for the reason why the firm was acting in violation of under sections 11(1), 11(4) and 11B of the SEBI Act, 1992 for violation of section 12(1) of the SEBI Act, 1992 read with regulation 3(1) of the IA Regulations, 2013. And providing advisory services.
The noticee no.2 presented their defense on behalf of all others and responding to it was found that Noticees were engaged in the business of providing investment advice to the public, for consideration and were thus, acting as an investment adviser, as defined under Regulation 2(1) (m) of the IA Regulations, 2013. And it is a well-settled law that ignorance of the law is no excuse. Hence, the Noticees cannot take the plea that they had the genuine and bonafide belief that the said business was well within the scope of work of an authorized person of a sub-broker as the provisions of the SEBI Act, 1992 and the IA Regulations, 2013 are clear in this regard that a person must obtain a certificate of registration before acting as an investment advisor and to protect the interest of investors and to maintain the integrity of the securities market, IA Regulations, 2013 provides safeguards to ensure that the investors who receive investment advice are protected. One such safeguard is that any person carrying out investment advisory activities has to obtain registration from SEBI as required under Regulation 3(1) of the IA Regulations, 2013.
From the further submissions made by the noticee, it was found out that false declaration in his application form for registration as an investment adviser under the proprietorship concern named ‘Capital Heed Financial Research’ before SEBI, stating that he was not engaged in investment advisory services before filing his application and thereby had intentionally furnished a false/misleading/wrong information to SEBI it shows that the conduct of firm was dubious and not genuine.
Hence these activities/ representations as being made by the Noticees without holding the certificate of registration as investment adviser violate Section 12(1) of SEBI Act, 1992 read with Regulation 3(1) of the IA Regulations, 2013. And direction issued to noticees under Sections 11(1), 11(4), and 11B, read with of Section 19 of the SEBI Act, 1992.
Order reviewed by Naveen Sharma