Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs17 lakh on Parag Salot, a registered research analyst (RA), for multiple regulatory violations, including mandatory annual audits for eight financial years.
In an order, Asha Shetty, adjudicating officer (AO) of SEBI, says, "As a SEBI registered RA, Mr Salot was under a statutory obligation to abide by the provisions of RA Regulations and act honestly and fairly in the best interests of their clients, which he has failed to do. Such disregard for the provisions of law governing the functioning of RA calls for a penalty which would act as a deterrent."
One of the primary violations was Mr Salot's failure to conduct the mandatory annual audits for eight financial years, from 2015 until the issuance of the show-cause notice (SCN), which violated Regulation 25(3) of the RA Regulations. Mr Salot attempted to justify this by claiming that he believed compliance audits were only required for corporate entities, not individuals. However, as a registered RA since March 2015, Mr Salot was obligated to conduct these audits and ignorance of the law was not accepted by the SEBI AO as a valid defence.
In addition to the failure to conduct audits, the RA was found in violation of for not promptly notifying SEBI of a change of address. Mr Salot argued that he faced technical difficulties while attempting to update his address on the SEBI portal. However, SEBI's investigation revealed that he began operating from the new address in June 2023, yet failed to update SEBI until 2024, following the inspection. This delay in reporting a material change constituted a breach of SEBI's registration requirements.
Further violations involved providing false and incomplete information regarding the details of his office to SEBI. Mr Salot attributed the misinformation to a third-party website developer, but SEBI held him responsible for the accuracy of the data on his website.
Mr Salot was also found guilty of failing to include required details, such as his registration number and registered office address, in advertisements which violated SEBI's master circular for RA. Although Mr Salot claimed that the advertisements predated the circular, SEBI found that the advertisements continued to run well after the circular came into effect in May 2023, making his defence invalid.
Another serious violation involved the RA failure to display the investor charter and complaints, including those from the SCORES system, on his website, .Mr Salot defended his actions by stating that his business operations were closed and that his website was inactive. However, SEBI maintained that, as a registered intermediary, he was still obligated to comply with these regulations.
Mr Salot was also penalised for not maintaining records of emails related to his research activities. He claimed that his mailbox was deactivated due to the closure of his operations, but this was not deemed a valid excuse, as maintaining records remains a requirement even after operations cease.
In addition, Mr Salot was found guilty of fraudulent activities, including misrepresenting himself as an investment adviser (IA) and promising assured returns, such as Rs4,000 per positive trade, without appropriate disclaimers. Mr Salot's defence that a website developer copied the misleading content was rejected, as he was responsible for ensuring the accuracy of all information provided.
Finally, Mr Salot was penalised for conducting research analyst activities without holding a valid National Institute of Securities Markets (NISM) certification from 1 December 2016 to 6 September 2022.