Besides, they have been prohibited from acting as investment advisors till further directions, the regulator said in an interim order.
Sebi found that the three companies held themselves as investment advisors and collected subscription fees from investors for providing stock recommendations without obtaining a registration in their own names as required under the Investment Advisers (IA) norms.
By virtue of providing unregistered investment advisory services, Sebi said Dalal Stocks collected Rs 2.12 crore, Devki Stocks (Rs 1.19 crore and Vishwas Stocks (Rs 93.89 lakh) during the period January 2018 to August 2020.
The regulator noted that one of the common directors in the three companies–Himanshu Bharatkumar Bhavsar– has in his individual capacity a registration certificate to act as an investment adviser.
As per the websites of these three firms, they started operating prior to him making an application for registration to Sebi. Bhavsar has prima facie, provided a false declaration in Form-A to Sebi while applying for registration as IA and was prima facie, conducting unregistered IA activities prior to getting registration, the regulator noted.
In the Form A which is the form of application for grant of registration certificate, there is a separate section for firm to fill its details. Moreover, there are separate requirements for investment advisers when it comes to an individual and firm.
Further, total Rs 9.76 lakh has been prima facie, collected by him from clients for offering investment advice prior to Sebi registration and the amount has been received in the bank accounts of the three companies.
By indulging in such activities, they violated the provisions of IA Regulations, the Securities and Exchange Board of India (Sebi) said in an interim order passed on Monday.
Accordingly, the capital markets watchdog asked the three companies and their directors to “cease and desist from acting as investment advisors” until further orders.
They have been asked to immediately withdraw and remove all advertisements in relation to their investment advisory activity until further orders.
Further, the regulator prohibited them from diverting any funds raised from investors and restrained them from disposing of any assets, whether movable or immovable, including money lying in bank accounts, except with the prior permission of Sebi.
Sebi asked them “not to access the securities market and buy, sell or otherwise deal in securities in any manner whatsoever, directly or indirectly, until further orders”.
In a separate interim order, Sebi has barred Simply Earn Research and its partners–Animesh Parida and Parth R Trivedi — from the capital markets for providing tips without obtaining a registration from the regulator as required under IA norms.
Also, they have been restrained from acting as investment advisors till further directions.
The total amount of money, prima facie, observed to have been collected by Simply Earn Research is a little over Rs 2 crore, Sebi noted.