FINANCIAL INFLUENCERS SETTLES CASE WITH SEBI FOR UNREGISTERED ADVISORY SERVICES

AUTHOR :AFFLUENCE ADVISORY PRIVATE LIMITED

The Securities and Exchange Board of India (SEBI) recently settled a case involving financial influencers who provided unregistered investment advisory services. The case involved Mr. P R Sundar, Ms. Mangayarkarasi Sundar, and Mansun Consultancy Pvt. Ltd., highlighting the consequences of operating without the necessary SEBI registration. This article examines the alleged violations, the penalties imposed by SEBI, and the importance of obtaining proper registration for advisory firms.

Facts of the case

Mr. P R Sundar was found to be offering advisory services without the necessary registration from SEBI. It was discovered that he operated the website www.prsundar.blogspot.com, where he advertised various advisory service packages. Payments for these services were collected through a payment gateway linked to the bank account of Mansun Consultancy Pvt. Ltd. (referred to as ‘Mansun’ or ‘the company’) held with ICICI Bank Ltd. Mansun was established on June 30, 2017, with Mr. P R Sundar and Ms. Mangayarkarasi Sundar, the promoter directors, each holding a 50% shareholding in the company.

What was the alleged violation?

It was alleged as follows:

1. The website www.prsundar.blogspot.com had posts from August 27, 2013 onwards. The website has a tab titled “Advisory” wherein the following is mentioned, “Advisory services – Daily calls on Telegram: We will be giving daily calls on what positions to take, adjustments, etc. on telegram messaging app”. The website also provided a payment link including a Razorpay link.

2. It is learnt from Razorpay vide their reply dated April 27, 2021 that the amount collected through the website www.prsundar.blogspot.com was credited to the ICICI bank a/c. no. ********0393 of Mansun.

3. From the account opening forms and KYC documents of the Applicants forwarded by the ICICI Bank and Razorpay, it is observed that the type of business mentioned therein is “share marketing consultancy”.

4. On enquiry, Mansun vide email dated March 17, 2022 submitted a list of recommendations provided by it for the month of January 2021. Upon analysis of a sample of such recommendations it is observed that the aforesaid recommendations are related to purchasing / selling / dealing in securities which were communicated to the clients. Therefore, it was alleged that the recommendations provided by Mansun fall under the category of ‘investment advice’ as defined under Reg. 2 (1) (l) of SEBI (Investment Advisers) Regulations, 2013 (hereinafter referred to as ‘IA Regulations’).

5. Further, on account of the above activities, it was alleged that the Applicants have engaged in the activities of an ‘investment adviser’ as defined under regulation 2 (m) of IA Regulations which is reproduced as under: ““investment adviser” means any person who for consideration, is engaged in the business of providing 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.” (f) The advisory fees collected in the said ICICI Bank account no. *********0393 through Razorpay and direct credits are Rs. 4,36,42,503.13/- and Rs. 23,53,260/- respectively. (g) In view of the above, it was alleged that the Applicants have carried out investment advisory activities without obtaining registration of SEBI and allegedly violated the provisions of Section 12(1) of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) read with Regulation 3 (1) of the IA Regulations.

What’s the penalty?

Mr P. R Sundar and ors chose to settle the matter. The nature of penalty is as follows:

Sl. No

Name                                            Amount of

penalty

Disgorgement

1. Mr PR Sundar                               15,60,000
2. Ms. Mangayarkarasi Sundar        15,60,000

3. Mansun Consultancy Private Limited

15,60,000            4,59,95,763 + interest of Rs 1,47,74,100 =

6,07,69,863

In addition to this all the applicants viz. Mr PR Sundar, Ms. Mangayarkarasi Sundar and Mansun Consultancy Private Limited are debarred from market for one year

Learnings

Recently SEBI has been cracking down heavily on entities providing advisory services without taking registration from SEBI. It always seems lucrative to start an advisory firm. But one must always keep in mind to take registration from SEBI under respective regulation before commencing an advisory service. Most importantly if one is a media influencer or a public personality one should choose its words very carefully.