BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA

Transcription

1 BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA [ADJUDICATION ORDER NO: AO/SBM-VB/EAD-3/ 25 /2016] ORDER UNDER SECTION 15 I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5 OF SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 In respect of: Best Stock Solutions, (Represented by Mr Amit Upadhyay), 7th Floor, Crescent Business Park, Sakinaka, Telephone Exchange Lane, Andheri (East), Mumbai {PAN: AAPPU2088M} FACTS OF THE CASE 1. Securities and Exchange Board of India (hereinafter referred to as SEBI ) observed that Best Stock Solutions (hereinafter referred to as 'Noticee / BSS') was providing stock advisory tips and Guaranteed Money Making Share Market Tips to general public / clients through its website ( without being registered with SEBI as an Investment Advisor. On preliminary examination, it was observed that the Noticee had used the reference of various SEBI registered Stock Broking firms through its website for providing guaranteed tips and assured returns to clients. Page 1 of 20

2 2. As the aforesaid information / details obtained from the above mentioned website and also other details obtained during the preliminary examination, prima facie indicated that the activity of the Noticee is in the nature of offering stock market advisory tips and investment advisory services to its clients, the concerned department of SEBI viz. Investment Management Department vide letters dated February 14, 2014, March 7, 2014, April 9, 2014 and May 22, 2014 and also vide s dated April 10, 2014, May 22, 2014 and June 13, 2014 had advised the Noticee to refrain from providing stock market advisory tips to its clients and to ensure compliance with the provisions of SEBI ( Investment Advisers) Regulations, 2013 (hereinafter referred to as Investment Advisers Regulations ). However, it was observed by SEBI that the Noticee had failed to respond to the aforementioned letters / s and also failed to deactivate the website through which the Noticee was providing stock market advisory tips and investment advisory activities to its clients. It was therefore alleged that the Noticee s activities were in violation of the provisions of Section 12 of the SEBI Act, 1992 (hereinafter referred to as SEBI Act ) and also Regulation 3 of the Investment Advisers Regulations. APPOINTMENT OF ADJUDICATING OFFICER 3. SEBI vide Order dated September 11, 2014 appointed Shri D Ravikumar as Adjudicating Officer under Section 15-I of the SEBI Act read with Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as 'Adjudication Rules') to inquire into and adjudge under the provisions of Section 15HB of the SEBI Act, the alleged violation committed by the Noticee of the provisions of Section 12 of the SEBI Act read with Regulation 3 of the Investment Advisers Regulations. Subsequently, upon the transfer of Shri D Ravikumar, I have been appointed as Adjudicating Officer, in the present matter, vide Order dated June 22, Page 2 of 20

3 SHOW CAUSE NOTICE, REPLY AND HEARING 4. Show Cause Notice ref No. A&E/EAD-3/DRK-DS/31070/2014 dated October 31, 2014 (hereinafter referred to as 'SCN') was issued to the Noticee in terms of the provisions of Rule 4 (1) of the Adjudication Rules, to show cause as to why an inquiry should not be held against the Noticee and penalty, if any, should not be imposed under the provisions of Section 15HB of the SEBI Act for the alleged violation committed by the Noticee of the provisions of Section 12 of the SEBI Act read with Regulation 3 of the Investment Advisers Regulations. Vide letter dated November 17, 2014, the Noticee requested for 15 days time to compile the relevant details/ information and also requested for an opportunity of personal hearing to be provided in the said matter. Thereafter, it was mentioned by the Noticee through a letter of authority that Shri Joyashish Maitra of M/s Maitra J and Co (Chartered Accountants) would represent the Noticee in all matters relating to the proceedings, including representing the Noticee for the hearing, filing the reply on behalf of the Noticee etc. A letter dated March 11, 2015 was subsequently received from M/s Maitra J and Co in this regard seeking time till March 25, 2015 to submit the reply to the SCN. Vide letter dated March 24, 2015, M/s Maitra J and Co filed a reply to the SCN on behalf of the Noticee. 5. The gist of the allegations leveled against the Noticee in the SCN dated October 31, 2014 are as under : a) It was mentioned that the Noticee had provided stock market advisory tips through its website without being registered with SEBI as an Investment Adviser in terms of the Investment Advisers Regulations. It was further alleged that the Noticee continued to function as Investment Adviser despite repeated instructions issued to the Noticee by SEBI to refrain from undertaking such activities without being registered with SEBI under the provisions of Investment Advisers Regulations. Page 3 of 20

4 b) In terms of the provisions of Section 12 of the SEBI Act read with Regulation 3 of the Investment Advisers Regulations, Noticee was required to register itself as an Investment Adviser within six months from the commencement of the Investment Advisers Regulations. The Investment Advisers Regulations came into existence w.e.f January 21, However, no application for registration as Investment Advisor was received by SEBI from the Noticee within 6 months i.e. till July 20, 2013, and it was alleged that the Noticee continued to undertake the activities as Investment Advisor, without obtaining the registration, which prima facie resulted in the violation of the provisions of Section 12 of the SEBI Act read with Regulation 3 of the Investment Advisers Regulations by the Noticee. It was also observed that the Noticee made an application to SEBI for registration as an Investment Adviser only on June 13, 2014, which is approximately one year after the above said prescribed period. c) In view of the above violations alleged to have been committed by the Noticee, it was alleged that the Noticee was liable for penalty under the provisions of Section 15 HB of the SEBI Act. 6. In the interest of natural justice and in order to conduct an inquiry in terms of Rule 4 (3) of the Adjudication Rules, Noticee was granted an opportunity of personal hearing on August 26, 2015 vide letter dated August 7, 2015 and again on September 29, 2015 vide letter dated September 23, Shri Joyashish Maitra ( M/s Maitra J and Co) appeared for the personal hearing on behalf of the Noticee on August 26, 2015 and on September 29, Pursuant to the hearing, Noticee made additional submissions through M/s Maitra J and Co vide its letters dated August 25, 2015 and August 31, The relevant excerpts of the submissions made by the Noticee (through M/s Maitra J and Co) vide its Page 4 of 20

5 letters dated March 24, 2015, August 25, 2015 and August 31, 2015 are as follows: a) Till the beginning of the Year 2014, our website had the contents to provide knowledge to the general public and we did not reap any monetary benefit out of the same in any manner at all. Neither did we solicit any business of stock market in any manner from any person. b) The website was created for knowledge purposes only and we did not approach anyone in the open market to solicit any business. No one from the general public had approached us or invested in stock market based on our website and neither did we enter into any CIS Schemes, for that matter. At no point of time, we solicited business on the basis of investments in market or market investment schemes. c) We applied for registration as Investment Advisor on June 13, 2014 (within 6 months of the applicability of the particular Section). As of now, pending the registration, we are not advising anyone regarding stock market and neither are we sourcing clients from general market. We have never made anyone invest through our advice. d) We would like to mention that ours is a proprietorship concern and we are not listed in the market, so any such benefits did not arise to us. In the same manner, we did not pin point any particular company in our website. We provided general information on stock market trends which are provided even by all news channels on a daily basis for knowledge purposes. This does not tantamount to deriving particular benefits in any manner. No one has invested in the market as per our website. Page 5 of 20

6 e) In this context, your attention is invited to the decision of the Hon'ble Securities Appellate Tribunal in the matter of Rakesh Agarwal vs. SEBI (2004) 1 Comp U193 wherein the Hon'ble Tribunal has inter alia held that the Insider Trading Regulations, if read with the objective of prohibiting insider trading, make it clear that motive is built into the regulation and that insider trading without establishing a motive is not punishable. The Hon'ble Tribunal further held that what is sought to be prohibited is gaining unfair advantage by indulging in insider trading. Thus, if it is established that the person who had indulged In Insider trading had no intention of gaining any unfair advantage, the charge of insider trading warranting penalty cannot be sustained against him. f) Ours was an open advisory business and we never dealt with stock market investment schemes and neither did we advise anyone as to investment in any particular scrip or company. Since the pendency of our registration application, we have even drastically reduced our advisory business. The advisory was mainly to calculate for some clients their networth and what percentage of income they could invest in various investment schemes, like Insurance policies, PPF, etc. For this, some nominal advisory fees were charged. g) There was no tip given to any corporate client or even retail advisory clients. BSS never undertook any market approach for any clients. BSS collected data and forwarded to big advisors (registered) such as Choksey, Samruddhi and Angel Broking. They analysed the data and reverted to BSS what was the eligible amount for investment. These names were reflected in the website of BSS and at no point of time it was stated by BSS that they were investment advisors and did not represent as such. Page 6 of 20

7 h) The only glitch in the website was the word TIPS, that too not in the main page, the website creator committed this. When this was brought to the notice of BSS they immediately had it removed. i) Since the regulations were brought into effect, the business was not viable due to the compliances to be made. However, the advisor for BSS could not specify the regulations and there was delay in making the application beyond the required date. We pray for leniency on this count. We never made any money on this count. j) BSS finally made the application on In the absence of any confirmation for registration, first the website was shut down on and the client base also started dwindling to negligible figures as the business was not at all viable k) It took some time to apply for registration as our advisor at that time consumed time in spite of him being provided with all the documents. Anyway, with regards to this, kindly overlook and condone the small lapse. l) The contents of the website were very simple, providing knowledge as to the stock market and no particular company was pin pointed in the website. No particular company was advised in this regard. m) No corporate clients were dealt within the same and hence no particular client base is available. n) Pending issuance of registration by SEBI we have stopped the advisory business also. o) The entity of BSS is being closed full and final from and all business in this company would totally stop. p) The year wise breakup of the receipts of BSS are as follows: Page 7 of 20

8 Financial Year Amount ( in Remarks Rs) ,63, ,78, ,84, Through BPO training including some stock market advisory fees of Rs. 2,46, ,78, upto August 2015 through BPO training only On behalf of the Noticee, M/s Maitra J and Co also made the following additional submissions during the personal hearing held on August 26, 2015 and on September 29, (a) Noticee admitted to the delay on its part in making the application for registration as Investment Adviser under the Investment Advisers Regulations. Noticee also mentioned during the course of the proceedings that it has currently stopped the business of Investment Advisory and have also removed the website in this regard. (b) Noticee admitted to the fact that it had provided tips to clients even after the notification of Investment Advisers Regulations (without being registered as an Investment Adviser with SEBI). (c) Noticee also admitted to collection of fees from its clients towards the advisory services provided to them. (d) Noticee requested that a lenient view may be taken in the said matter. CONSIDERATION OF ISSUES AND FINDINGS 7. I have taken into consideration the facts and circumstances of the case, the material available on record, the reply submitted by the Noticee vide its letters dated March 24, 2015, August 25, 2015, August 31, 2015 and also the submissions made by M/s Maitra J & Co on behalf of the Noticee Page 8 of 20

9 during the personal hearing held on August 26, 2015 and September 29, I observe that allegations were levelled against the Noticee that it had provided stock market advisory tips, guaranteed money making share market tips to clients through its website It was therefore alleged that the Noticee had functioned as Investment Adviser without being registered with SEBI under the provisions of Investment Advisers Regulations. 8. Before moving forward, the relevant extracts of the provisions of Section 12 of the SEBI Act and Regulation 3 of the Investment Advisers Regulations, allegedly violated by the Noticee and as mentioned in the SCN issued to the Noticee is reproduced below: SEBI Act "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: Provided that a person buying or selling securities or otherwise dealing with the securities market as a 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 immediately before the establishment of the Board for which no registration certificate was necessary prior to such establishment, may continue to do so for a period of three months from such establishment or, if he has made an application for such registration within the said period of three months, till the disposal of such application: Provided further that any certificate of registration, obtained immediately before the commencement of the Securities Laws (Amendment) Act, Page 9 of 20

10 1995, shall be deemed to have been obtained from the Board in accordance with the regulations providing for such registration.... (2) Every application for registration shall be in such manner and on payment of such fees as may be determined by regulations. (3) The Board may, by order, suspend or cancel a certificate of registration in such manner as may be determined by regulations: Provided that no order under this sub-section shall be made unless the person concerned has been given a reasonable opportunity of being heard. Investment Advisers Regulations Application for grant of certificate. Reg 3 (1) - 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: Provided that a person acting as an investment adviser immediately before the commencement of these regulations may continue to do so for a period of six months from such commencement or, if it has made an application for a certificate under sub-regulation (2) within the said period of six months, till the disposal of such application. (2) An Application for grant of certificate of registration shall be made in Form A as specified in the First Schedule to these regulations and shall be accompanied by a non-refundable application fee to be paid in the manner specified in the Second Schedule 9. I find that the Noticee in its letter dated February 6, 2014, which was addressed to SEBI had mentioned that it is an entity registered under the Limited Liability Partnership Act and earlier it was functioning as a proprietary firm. However, I observe from the subsequent letters/correspondence exchanged between the Noticee and SEBI, which also includes the information submitted by the Noticee in its application form for registration as Investment Adviser i.e Form A that the Noticee had specifically mentioned that it is a proprietary firm functioning in the name Page 10 of 20

11 of Best Stock Solutions and the Proprietor s name was also mentioned in the application form as Shri Amit Upadhyay. 10. I observe that SEBI had received a complaint against the Noticee during January 2014, wherein it was alleged by the complainant that the Noticee was providing guaranteed money making share market tips on its website viz. In this regard, I also observe that the complainant had enclosed the relevant page extracted from the above mentioned website. On perusal of the contents mentioned in the complaint and also the website, I find that the Noticee had used the reference of SEBI registered Stock Brokers viz. K R Choksey, Networth Direct, Samurdhi India etc. I observe from the reply of the Noticee that it was associated with the above mentioned Stock Brokers for the purpose of sharing stock market related expertise and research data based on past performances of the listed stocks. I also observe that the Noticee had added the additional feature Guaranteed Money Making Share Market Tips on its website so as to entice the clients to invest in the stocks for which the tips were offered. I find from the contents mentioned in the website that the logo and tag line of the Stock Brokers mentioned above were prominently displayed by the Noticee, which leads to a visual misrepresentation made to the clients who invest in the stocks for which the tips were offered by the Noticee. Further, it also gives an impression that the stock market tips and assured returns guaranteed through the website of the Noticee are backed by the commitment of the Stock Brokers, as mentioned above. 11. I find from the contents mentioned in the Noticee s website that the Noticee had used the terms such as stock tips, stock market tips on mobile, short term and long term tips, read our terms and conditions of stock tips on your mobile for 2 days, Big profit less capital, Bank Nifty calls, Future and Options, STBT Tips etc. Further, I also observe that Page 11 of 20

12 the Noticee was assuring guaranteed profits / returns on execution of the stock tips and were offering stock tips in both the segments of the stock market i.e cash and derivatives. In view of the above, it goes without saying that gullible investors would have been easily lured by the contents mentioned in the Noticee s website and would have made investment decisions in the stocks for which the tips were provided by the Noticee. Further, these terms that were being used by the Noticee in its website, as mentioned above, clearly points out to the fact that the Noticee was engaged in providing investment advisory services to its clients within the meaning of Investment Advisers Regulations. 12. I observe that the Stock Brokers viz. K R Choksey, Networth Direct and Samruddhi India in their respective s addressed to SEBI have denied knowledge about the fact that the Noticee was using their name through the website for providing guaranteed stock market tips to clients. I further observe from the reply submitted by the Stock Brokers that they had utilized the services of the Noticee for obtaining the search engine for marketing facilities and as per the agreed terms, they were providing research calls / research reports to the Noticee. I find that the Stock Brokers have categorically stated in their reply that the research reports / calls provided by them to the Noticee did not contain any guaranteed tips or guaranteed money making share market tips. I also observe that the Stock Brokers have severed all their business connections with the Noticee upon receipt of the complaint from SEBI. 13. On perusal of the bank statement of the Noticee i.e Account no maintained by the Noticee with Axis Bank, I observe that there were regular flow of funds in the form of cash deposits ranging from Rs 5000/- to Rs 15,000/- which were made into the above mentioned account during the calendar years 2012 and These cash deposits that were made into the Noticee s bank account are nothing but the Page 12 of 20

13 subscription amount paid by the users of the Noticee s website and also the charges paid by the clients towards the stock advisory services offered to them by the Noticee. The Noticee has also admitted to receiving these amounts towards BPO training facilities and receiving small amount towards stock market advisory services offered to its clients. 14. Contrary to the above observations, I find that the Noticee in its letters dated August 25, 2015 and August 31, 2015 have denied offering stock tips to corporate or retail clients, collecting money from the general public, recommending any company to clients from an investment perspective, coercing the public to invest in stocks etc. It was mentioned by the Noticee that the website ( ) had contents to only provide knowledge to its users and the website did not contain any information recommending investment in the stocks of listed companies. I am unable to agree with the submissions / views put forth by the Noticee. It is on record that the Noticee on various occasions have admitted to offering stock market related advisory services, functioning as investment advisor and also offering stock market related tips to its clients. Relevant submissions made by the Noticee in this regard are mentioned below: Vide letter dated February 6, 2014 addressed to SEBI, Noticee mentioned that we are in association with renowned stock broking firms as mentioned in our website with consent of those broking firms under mutual agreement for sharing stock market related expertise and research data based on past performance of the listed stocks. The arrangement is made to create a competitive edge and generate synergy amongst us by sharing our expert knowledge and hard core research and not with an intention to do superfluous marketing Vide letter dated February 6, 2014 addressed to SEBI, Noticee mentioned that We provide tips to our clients based on the past performance and financial strength of the stocks. We have added the Page 13 of 20

14 said feature Guaranteed Money Making Share Market Tips in a true and honest spirit and based on hard core efforts which our expert team is putting and based on our own experience and judgment. However, share market is always subject to market risk which every prudent investor knows including our own loyal clients. Apart from this, we have also clearly mentioned various disclaimers relating to our services under Terms of Services which includes all kinds of risks attached with trading in share market and we make a point to inform all our users to go through the relevant Terms of Services before associating with us and using our Tips Vide letter dated February 6, 2014 addressed to SEBI, it was mentioned by the Noticee that It is rightly said that if you Don t believe Yourself Nobody Else will either. We strongly believe our expert team, their efforts, our experience and judgment and based on that we provide tips to our clients, however it is upto the prudent investor to take a call. We are there to make investors informed about the day to day market activities, analysis and give them suggestions, however the investors are the ultimate decision takers. We have always worked in a true spirit for our clients and given them our expert tips to the best of our knowledge and belief. However, after receiving the Notice from SEBI we have rightly removed the said line and we assure SEBI and authorities that such incidence will never happen in future. Vide letter dated August 31, 2015 addressed to SEBI, Noticee mentioned that The only glitch in the website was the word TIPS, that too not in the main page, the website creator committed this. When this was brought to the notice of BSS they immediately had it removed. In the same letter Noticee also mentioned that BSS finally made the application on In the absence of any confirmation for registration, first the website was shut down on and the client base started dwindling to negligible figures as the business was not at all viable Page 14 of 20

15 Vide letter dated June 13, 2014 forwarding the application form for registration as Investment Adviser, the Noticee had specifically mentioned that I wish to state that I am a proprietor of Best Stock Solutions and is already engaged in providing investment advisory services since June Our advice are mostly on the equity and debt products and our clients are traders and investors who seek guidance from experts. The services we provide are extremely personalized and based on thorough reading, analysis and understanding of financial market. Thus, from the facts mentioned above and also the observations brought out in paras 10 and 11 above, I am convinced that the activities of the Noticee of providing stock market related tips and making stock market related recommendations and offering advisory services to the investors on payment of fees falls within the definition of the activities of Investment Adviser as defined under Regulation 2 (m) of the Investment Advisers Regulations. The above observations also leads to the inescapable conclusion that the Noticee had functioned as an Investment Adviser for a very long period without obtaining registration from SEBI. In view of the above observations, I also find it very unreasonable on the part of the Noticee in making conflicting statements / submissions from time to time as regards the usage of the term Tips in its website and also in the matter regarding providing stock market related tips and advisory services to clients through its website. 15. I observe that SEBI had issued letters dated January 31, 2014, February 17, 2014, March 7, 2014, April 9, 2014, May 22, 2014 and also sent s to the Noticee on April 10, 2014, May 22, 2014 and June 13, 2014 advising the Noticee to refrain from providing stock market advisory tips and also to comply with the provisions of the Investment Advisers Regulations. I further observe that the Noticee had submitted its Page 15 of 20

16 application for registration as Investment Adviser only on June 13, 2014 i.e after prolonged correspondence made by SEBI with the Noticee. I also find that despite specific instructions issued to the Noticee by SEBI from time to time to refrain from carrying out the stock market advisory tips and to comply with the provisions of Investment Advisers Regulations, the Noticee took steps to deactivate its website only on October 1, I observe that in terms of the Investment Advisers Regulations, Noticee was required to submit its application for registration as Investment Adviser by July 20, Further, SEBI vide Press Release ( PR) No- 53/2013 dated May 29, 2013 had advised that In terms of the Investment Advisers 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 or he is specifically exempt Also, vide Press Release No 77/2013 dated August 28, 2013, SEBI had further advised that All the persons acting as an investment adviser before the commencement of Investment Advisers Regulations are advised to make their application for grant of registration before October 21, 2013 to continue to do so and shall comply with the requirement of obtaining a certificate of registration for acting as Investment Adviser under the Investment Advisers Regulations However, in spite of the above instructions of SEBI and also the repeated letters/ s sent to the Noticee by SEBI advising the Noticee to comply with the provisions of Investment Advisers Regulations, I find that the Noticee had submitted its application for registration as Investment Adviser only on June 13, 2014 and deleted its website from the public domain on October 1, In the process, I observe that the Noticee has functioned as an Investment Adviser for a lengthy period without obtaining registration from SEBI. This shows scant respect and defiance exhibited by the Noticee towards complying with the instructions of SEBI. Insubstantial arguments put forth by the Noticee in this regard that its advisor had taken time to submit the Page 16 of 20

17 application for registration, compliances were required to be made in the matter of registration etc cannot be accepted. 16. I observe that the Noticee in its reply vide letter dated March 24, 2015 has mentioned that it had not derived any trading benefit or indulged in Insider Trading. Further, Noticee also mentioned that it had not undertaken any CIS activity or schemes. In this regard, Noticee also quoted the decision of Hon ble Securities Appellate Tribunal (SAT) in the matter of Rakesh Agarwal Vs SEBI (in the year 2004). I observe that the above matter, which was decided by the Hon ble SAT was regarding allegation of insider trading committed by Rakesh Agarwal (appellant). I further observe that the present proceedings against the Noticee has been initiated for its failure to comply with the provisions of Section 12 (1) of the SEBI Act read with Regulation 3 (1) of the Investment Advisers Regulations. As such, I do not think it necessary to deal with the issues put forth by the Noticee on Insider Trading, trading benefits derived in this regard, indulging in CIS etc as they are not relevant in the context of the present proceedings against the Noticee. 17. Thus, from the facts and circumstances of the case and the observations made above, I am convinced that the Noticee has functioned as Investment Adviser for a prolonged period without obtaining registration from SEBI. In the process, the Noticee has violated the provisions of Section 12(1) of the SEBI Act read with Regulation 3 (1) of the Investment Advisers Regulations. 18. The Hon ble Supreme Court of India in the matter of SEBI Vs Shri Ram Mutual Fund ( 2006) 68 SCL 216 (SC) held that In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established and hence the intention of the parties committing such violations becomes wholly irrelevant Page 17 of 20

18 19. In view of the above, I am convinced that it is a fit case to impose monetary penalty on the Noticee under the provisions of Section 15 HB of the SEBI Act, which reads as under: Penalty for contravention where no separate penalty has been provided. Regulation 15 HB. Whoever fails to comply with any provisions of this Act, the rules or the regulations made or directions issued by the Board thereunder for which no separate penalty has been provided, shall be liable to a penalty which shall not be less than one lakh rupees but which may extend to one crore rupees 20. While determining the quantum of penalty, it is important to consider the factors stipulated in Section 15 J of the SEBI Act, which reads as under: 15 J Factors to be taken into account by the adjudicating officer : While adjudging the quantum of penalty under Section 15 I, the adjudicating officer shall have due regard to the following factors, namely- (a) The amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; (b) The amount of loss caused to an investor or group of investors as a result of the default; (c) The repetitive nature of the default 21. The material made available on record has not quantified the amount of disproportionate gain or unfair advantage made by the Noticee and the loss suffered by the investors as a result of the Noticee s default. I observe that Noticee vide its letter dated August 31, 2015 has confirmed that it had received an income of Rs lakh for the financial year , Rs lakh as income during the financial year , Rs 7.84 lakh during the financial year and Rs 1.78 lakh during the financial year ( upto August 2015). However, I observe from some of the Page 18 of 20

19 records submitted by the Noticee during the course of the proceedings, which also contains disclosure made by the Noticee to the Department of Service Tax under the Voluntary Compliance Encouragement Scheme 2013 that the Noticee has reported a total amount of Rs lakh as the amount received by it as money during the period April to December 2012 (i.e for 9 months during the year 2012). The above details on income reported by the Noticee to the Service Tax authorities is inconsistent with the Noticee s confirmation made to SEBI that it had received Rs lakh as income during the FY In view of the above, the veracity of the income details submitted by the Noticee to SEBI is doubtful. 22. I am of the firm opinion that the activities undertaken by unregistered intermediaries in the securities market seriously compromise the regulatory framework and are detrimental to the interest of the investors in the securities market. The interest of the investors and orderly development of the securities market requires that perpetrators of such activities should be suitably penalized. I cannot lose sight of the fact that the Noticee had functioned as an unregistered Investment Adviser in the securities market for a prolonged period. I find that despite repeated instructions issued to the Noticee by SEBI to refrain from undertaking such activities and to comply with the provisions of Investment Advisers Regulations, Noticee failed to adhere to the instructions of SEBI and continued to function as an unregistered entity thereby putting the investors to large risk. Such defiance displayed by the Noticee towards regulatory instructions cannot be viewed lightly. Therefore, it is necessary that a justifiable penalty is imposed on the Noticee to meet the ends of justice. Page 19 of 20

20 ORDER 23. After taking into consideration all the facts and circumstances of the case, the material on record and the factors stipulated in Section 15 J of the SEBI Act, I, in exercise of the powers conferred upon me under Section 15 I of the SEBI Act, impose a penalty of Rs 12,00,000/- ( Rupees Twelve Lakh only) on the Noticee viz. Best Stock Solutions ( Represented by its proprietor Mr Amit Upadhyay) in terms of the provisions of Section 15 HB of the SEBI Act, I am of the view that the above penalty will be commensurate with the violation committed by the Noticee. 24. The penalty shall be paid by way of demand draft drawn in favour of SEBI Penalties Remittable to Government of India payable at Mumbai within 45 days of the receipt of this Order. The said demand draft shall be forwarded to the Chief General Manager, Enforcement Department, Securities and Exchange Board of India, SEBI Bhavan, Plot No. C 4 A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai In terms of the provisions of Rule 6 of the Adjudication Rules, copies of this order are being sent to the Noticee and also to Securities and Exchange Board of India. Place: Mumbai Date: SURESH B MENON ADJUDICATING OFFICER Page 20 of 20