Markets regulator Sebi on Monday barred Capitalaim Financial Advisory Pvt Ltd and five individuals from accessing securities market for selling services to clients without consideration of their financial position, investment objective and risk profiling.
The individuals who have been barred are the company's present and former directors-- Abhijeet Bajpai, Anant Tiwari, Debabrata Bhattacharjee, Sheetal Foujdar and Abhilasha Verma.
As per an interim order of Sebi, Capitalaim and its present directors Bajpai and Tiwari are directed to cease and desist from acting as an investment advisor.
Besides, they have been directed not to divert any funds raised from the investors.
Also, the regulator has directed them to immediately withdraw and remove all advertisements, representations, communications in relation to its investment advisory activity or any other activity in the securities market.
The interim direction comes after the regulator prima facie found Capitalaim and individuals in violations of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms as well as Investment Advisor (IA) regulations.
A probe by the Securities and Exchange Board of India (Sebi) found that Capitalaim was selling products and services to its clients without communicating the risk profile to them.
Further it was observed that Capitalaim was charging fees from clients which is disproportionate of their annual income and selling same services or packages to same clients on multiple occasion at different arbitrary price for future period / overlapping period, while an existing subscription is still active, which has the effect of locking in the client to the Investment Advisor, as IA has no refund and cancellation policy.
It had charged different arbitrary advisory fees from the same and different clients, Sebi noted.
Foujdar, Bhattacharjee and Verma were also the directors of Capitalaim when certain investors in respect of whose services non compliance is observed, became clients of Capitalaim, the order said.
The modus operandi adopted by IA , prima facie, shows that IA was actually not practicing investment advisory in the manner envisaged under the IA Regulations, which essentially would involve advising the clients considering their financial situation, risk appetite, financial goal, among others, it noted.
Hence, Capitalaim is prima facie running a scheme and defrauding its clients, with an intention to maximize its income through advisory fees by employing the above said devices, without caring for client's needs and keeping its own interest ahead of its client's interest, the regulator said.
The very nature of the investment advisory activity being practiced by entities has been found to be prima facie fraudulent and in violation of the provisions of PFUTP as well asIA regulations, Sebi noted.
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