SEBI Imposes Rs7 Lakh Penalty on Ankur Jain of Winway Research for Failing to Resolve Investor Grievances

Moneylife Digital Team 15 November 2024

Investor Interest

Market Regulator Securities and Exchange Board of India (SEBI) have imposed a penalty of Rs7 lakh on Ankur Jain, proprietor of Winway Research, after receiving complaints on the SEBI Complaints Redress System (SCORES).

In an order, Asha Shetty, adjudicating officer (AO) of SEBI, says, "I find from the observations made against Mr Jain and other material available on record that Mr Jain has failed to comply with the regulatory provisions and also failed to adhere to high standards of services to its clients. These violations make Mr Jain liable for monetary penalty under the provisions of Sections 15A(a), 15C and 15EB of the SEBI Act, 1992."

The complaints, which highlighted issues such as non-resolution of grievances and failure to maintain required call records, led to an investigation that uncovered multiple regulatory breaches by Mr Jain's advisory firm.

SEBI investigation found that Mr Jain had not appropriately resolved investor complaints and instead submitted action-taken reports (ATRs) that documented procedural compliance without actually resolving issues. SEBI regulations require not only the filing of ATRs but also the genuine resolution of grievances, emphasising that procedural adherence alone does not fulfil the requirement of complaint resolution.

Despite Mr Jain assertions that he complied with all procedures, SEBI noted several violations in his submitted documents, establishing his lack of compliance with SEBI Act provisions and regulations.

In his defence, Mr Jain argued that only the non-filing of ATRs would constitute a violation, referencing the 2014 circular and previous Supreme Court judgments that recognise the 'doctrine of impossibility'. He claimed that SEBI demand to resolve complaints within 30 days was an impossible compliance standard.

However, SEBI rejected this defence, asserting that the specific requirements of its circular apply distinctly to registered entities under its jurisdiction and emphasising that procedural arguments do not negate the need for effective complaint resolution.

Further examination revealed additional issues concerning Mr Jain failure to provide complete call records for some clients, which SEBI had requested as part of the complaint resolution process.

However, the submitted call records were incomplete, and in some cases, Mr Jain claimed technical failures had rendered certain call data irretrievable. SEBI found this justification inadequate, as Mr Jain provided no substantial evidence to support his claim of data corruption.

SEBI also highlighted that its circular requires investment advisers to keep comprehensive records to ensure transparency and protect client interests, which cannot be substituted by supplementary documentation, as Mr Jain argued.

Mr Jain appeal to technical challenges faced by the Multi Commodity Exchange (MCX) as a precedent for excusing his data loss was similarly dismissed. SEBI clarified that MCX's server issues were of a different context and could not be compared to Mr Jain case, underscoring that technical issues do not excuse the responsibility of maintaining client records as required by SEBI's guidelines.

In conclusion, SEBI's AO found that Mr Jain’s defences were unsubstantiated in the context of SEBI's requirements and the infractions were held to be violations of the SEBI Act. Consequently, SEBI has levied a Rs7 lakh penalty on Mr Jain for his lapses in investor grievance redressal and record maintenance, reinforcing the accountability standards SEBI imposes on its registered entities.

Comments