Markets regulator Sebi has slapped a fine of Rs 40 lakh on Star India Market Research for violating code of conduct by offering investment services meant for HNIs to the clients in Rs 1-5 lakh annual income bracket.
Besides, Sebi fined the investment advisor for receiving payments as fees for services to be rendered in future thereby not acting in a fair and reasonable manner.
The regulator carried out an inspection of investment advisory operations of the Star India Market Research (SIMR) from April 2016 to November 2017.
Following the inspection, Sebi observed that the investment adviser (SIMR) provided investment advice in disregard to the risk profile of its clients and its recommendations were not based on their experience, risk appetite and capacity for absorbing loss.
"...despite hardly any ability to absorb losses, the Noticee (SIMR) knowingly offered services meant for HNI clients to Sagar Gupta, Pawan Kumar Mandal, Ajay Kumar Shukla Suhail Ahmed Shaikh (its clients) thereby violating...code of conduct specified for Investment Advisers," Sebi said.
The clients had annual income in the range of Rs 1-5 lakh and were in age-group of 19-21 years and not HNIs themselves, the regulator said.
Moreover, Sebi found that SIMR did not act honestly and in the best interests of its clients and charged high amount of fees, twice or more for the same service.
The firm was also receiving fees for the services to be rendered in future, which was in violation of code of conduct for Investment Advisers, Sebi said.
"...actions by the Noticee indicated an effort to push its clients towards investments with a higher risk profile than they could afford, in breach of its fiduciary responsibility.
"Taking advance payments and pushing multiple products on to investors implied more interest in generating business in disregard for and at the cost of the investment needs of clients," Sebi said in an order dated August 7.
Subsequently, a fine of Rs 40 lakh was imposed on SIMR.
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