While imposing a penalty of Rs18 lakh, market regulator, Securities and Exchange Board of India (SEBI), has barred for two years three people for providing illegal investment advisory services and portfolio manager services (PMS). These three include: Vishal Lath (noticee 1), proprietor of Maxx Innovation Growth (MIG), Jitendra Bharbhuja (noticee 2), proprietor of Maxx Innovation (MI) and Vipin Sharma, an employee of both firms.
While imposing a fine of Rs6 lakh each on all the three noticee, SEBI also asked Mr Lath, Mr Bharbhuja and Mr Sharma to refund Rs93.43 lakh collected as fees from clients, investors, or complainants as fees or consideration or in any other form for their unregistered investment advisory activities.
In an order, Dr Anitha Anoop, chief general manager (CGM) of SEBI, says, "I note that the noticees promised a certain percentage of return to its clients or investors. I agree that promising returns is an active concealment of the material fact that every investment in the market is subject to market risk. In this regard, I note that the noticees adopted business tactics to induce the clients into availing the services he offered. I also note that promising returns in the securities market amounts to misrepresentation and misleading the investors. Such reckless conduct intended to induce investors to deal in securities constitutes 'fraud' under the PFUTP Regulations."
The market regulator received various complaints against the noticees.
MIG was alleged to be involved in investment advisory services without any registration with SEBI. One of the complainants, Gangadhar, stated that MIG and its associates target people through telephonic marketing, promise huge returns, and ask clients to deposit amounts in their accounts. MIG also created a fake portfolio tracking account on its website maxxinns.com, and regularly provided fake client IDs and bogus trade sheets. Mr Gangadhar claimed that the firm had charged Rs58,900 to him and refused to refund the money.
According to the SEBI investigation, Maxx Innovation Growth-MIG was providing various services such as stock cash, stock future, stock option, index future, commodity and stock cash.
On further observation by SEBI, it was noted that the MIG website provided Mr Sharma's bank account details for receiving payments.
The market regulator stated that in the account opening form (AOF) for MI's bank account maintained with HDFC Bank, Mr Bharbhuja is identified as MI's sole proprietor and signatory. Additionally, the annexure includes the gumasta licence submitted by Mr Bharbhuja to HDFC Bank, indicating his sole proprietorship of MI. It is also observed that in the mentioned AOF, he filed the nature of business and nature of industry as service advisory and stock broking services advisory, respectively.
SEBI further mentions that Mr Lath confirms his employment with Mr Bharbhuja and acknowledges transactions totalling Rs10.29 lakh in unregistered advisory business activities involving share entries, tips, and trading. He also mentioned payouts or refunds to investors, supported by bank statements. This, SEBI says, corroborated evidence from website screenshots, complaints, fund transfers, and additional documents such as account opening forms and know-your-customer (KYC) records.
The CGM of SEBI observed that both Mr Lath, proprietor of MIG, and Mr Bharbhuja, proprietor of MI, are related entities and operated by the same group of people. "Firstly, both entities share the same contact number, as listed on the websites of MIG and MI. Additionally, the websites of MIG and MI exhibit identical content and design. MIG operates its website under maxxinns.com, while MI operates under maxxinns.in. Furthermore, the agreements provided by complainants feature the same logo and letterhead, with an address identical to that of MIG."
Further, SEBI observed that the amounts credited in the bank accounts of the noticees are alleged to have been received as fees for the services rendered as investment advisors and portfolio managers. Specifically, an amount of Rs1.35 crore was credited in the bank account of Maxx Innovation Growth, Rs37.26 lakh to Maxx Innovation, and Rs30.24 lakh to Mr Sharma's account.
All three are restrained for two years from selling assets, properties, and mutual funds, shares, and securities held by them in demat and physical form except for the sole purpose of making the refunds.
"They shall not undertake, either during or after the expiry of the period of restraint and prohibition, either directly or indirectly, investment advisory services or any activity in the securities market without obtaining a certificate of registration from SEBI as required under the securities laws," the market regulator says
