SEBI Slaps Rs7 lakh Penalty on Investopher Research Services for Non-compliance

Moneylife Digital Team 26 March 2024

Market regulator Securities and Exchange Board of India (SEBI) has imposed a Rs7 lakh penalty on Investopher Research Services Pvt Ltd (noticee), a research analyst (RA) from Indore, for non-compliance with directions issued by SEBI.

In its investigation, SEBI found that the noticee committed serious contraventions, including non-disclosure of the material change in the principal place of business, non-usage of the term RA in the correspondences, and failure to act with honesty and good faith. Investopher Research Services also failed to ensure compliance and disclosure of relevant details in the research recommendations, not defining the terms used in the research recommendation sent through SMS to the clients and the research reports or research recommendations provided by the noticee through SMS were not duly signed and dated as specified in RA Regulations.

In an order issued last week, Shashikumar Valsakumar, adjudicating officer (AO) of SEBI, observed that Investopher Research Services allegedly made misleading claims on its website about employing top research analysts and focusing on client renewal despite low client retention rates and a lack of new client acquisition. The noticee was only able to renew only 86 of 6,166 clients. It accepted these violations and committed to making necessary changes on its website to ensure accurate disclosure for investor decision-making, as required by regulations.

The order mentioned that the noticee allegedly failed to disclose a material change in its principal place of business to SEBI. However, the noticee argued that the term principal place of business is not defined in the relevant regulations. It clarified that while its Indore office handles ancillary activities, the Mumbai office is the leading center for management and control, including maintaining books of accounts. Establishing the Indore branch was a strategic decision aimed at cost control. Moreover, it contended that there was no requirement to submit branch office details during the registration application process, and thus, they did not provide this information to SEBI.

During the investigation, SEBI found that Investopher Research Services was not including the technical analysis and other relevant disclosure, which includes material information about itself, including its business activity, disciplinary history, the terms and conditions on which it offers research reports, details of associates, the compensation received by the RA or research entity and such other disclosures which needs to be sent to the clients, the noticee has violated Regulation 19 of RA Regulations.

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