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Research Analyst Punit Kumar of Shrimoney Slapped with Rs10 Lakh Penalty by SEBI
Moneylife Digital Team 28 January 2025
Investor Interest
Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs10 lakh on Punit Kumar, proprietor of Shrimoney, a SEBI-registered research analyst (RA), for violations involved misleading clients with assurances of guaranteed returns, failure to supervise employee's communications and non-compliance with the RA code of conduct.
 
In an order, Asha Shetty, adjudicating officer (AO) of SEBI, noted that Mr Kumar had been repeatedly non-compliant concerning omission of disclosure despite the administrative warning issued by SEBI, which indicates a lack of diligence and disregard for compliance. "The violations are in contrary to the regulatory requirements and standards expected from registered intermediaries. Therefore, the actions of Mr Kumar should be dealt with appropriately by imposing a monetary penalty as effective deterrence."
 
SEBI initiated adjudication proceedings based on findings of alleged violations committed by Mr Kumar and his firm, including violations of various SEBI regulations, Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations and the RA Regulations.
 
During the inspection, SEBI identified that around 98 employees of Shrimoney were engaged in client communication and sales activities. However, the RA failed to monitor or maintain records of these communications, including calls and WhatsApp chats. The investigation revealed several instances where clients were misled. For example, clients were informed that they could recover their previous losses by subscribing to Shrimoney services after paying an initial amount. 
 
In some cases, clients were assured that service fees would be waived once losses were recovered, effectively providing a profit guarantee. One such case involved a client, Sanjay Dubey, where a Shrimoney employee allegedly told the client that a profit of Rs4 lakh could be made without any risk disclosures.
 
SEBI findings also showed the RA's failure to oversee communications between its employees and clients. "This lack of supervision resulted in misleading information being provided to clients regarding potential profits, without any proper risk warnings." 
 
Furthermore, the RA was found to have violated the SEBI Act and the RA Regulations by failing to ensure that its employees adhered to the required standards of conduct.
 
In response to the allegations, Mr Kumar denied providing any assurance of guaranteed returns. He pointed to disclaimers on the company website and user consent forms, which clearly stated the risks involved in stock market investments and explicitly denied any guarantees of profit. 
 
Mr Kumar argued that statements made to clients about waiving service fees until losses were recovered were merely assurances of service, not guarantees of profit. Mr Kumar also claimed that WhatsApp recommendations were a result of technical issues but failed to provide sufficient evidence to substantiate this claim.
 
Despite these defences, SEBI concluded that the evidence pointed to violations of various regulations designed to protect investors and ensure the integrity of the securities market. In particular, the employee's assurance of assured profit to a client, without appropriate risk disclosures, was deemed misleading by the market regulator. 
 
SEBI also found that Shrimoney had failed to properly monitor its employees' communications, a lapse that contributed to misleading clients and violating the regulatory framework.
 
In light of these violations, SEBI imposed a penalty of Rs10 lakh on Mr Kumar for failing to act in good faith, lacking due diligence, and breaching the required professional standards. 
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