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Koushal Tanwar,
Auro University
Monetary Solutions was fined Rs 25 lakh by capital markets regulator Sebi on Monday for breaking regulatory guidelines. This action shows SEBI's vigilant oversight of compliance in capital market-regulated entities. Under section 15-i of the Securities and Exchange Board of India Act, 1992, in conjunction with rule 5 of the Sebi (process for holding inquiry and imposing fines) regulations, 1995, before the adjudicating officer of the Securities and Exchange Board of India.
In the matter of Monetary Solutions, Proprietor – Mr Ankit Vyas (Investment Adviser), in this matter an Order was given by the Adjudicating Officer Barnali Mukherjee, "I observe that the noticee (Monetary Solutions) advertised fake testimonials and past performance on its website to demonstrate the accuracy of its tips, luring investors by showcasing profits generated by those tips and thereby deceiving its clients."[i]
Monetary Solutions, has penalties incorporated under the SEBI Act, 1992. It has been charged a penalty of ₹ 18,00,000/- (Rupees Eighteen Lakh Only) under Section 15EB and also a penalty of Rs 7,00,000/- (Rupees Seven Lakh Only) under the Section 15HA. Cumulatively the penalties thereafter mentioned claims a sum of ₹ 25,00,000/- (Rupees Twenty-Five Lakh Only).
Case Facts
Monetary Solutions Private Ltd. is a well-known financial advisory firm which has engaged itself in SEBI’s cross hairs for regulatory violations. The firm deals with availing investment advisory and financial planning services and seems to be in the market for several years and has client’s base. But it became evident that over the course of their performance, several differences in the functioning and conformity with SEBI requirements emerged. This saw some shareholders seek the help of SEBI by filing complaints that made reference to often deceptive practices prospered by these companies such as providing misleading, poor customer treatment and other complications in the advisory relations. There had been debated complaints from various investors made SEBI to launch an investigation on whether these allegations are true and how far the firm had gone in violating regulations.
At the period of September 19-23, 2022, the Security and Exchange Board of India audited Monetary Solutions, a SEBI-registered individual investment advisor whose owner is Mr Ankit Vyas. The monitoring concentrated on the strict adherence to the statutory provisions of the Investment Advisers (IA) Regulations and those of the Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations.
Monetary Solutions is formally acknowledged by SEBI as an independent investment advisor with registration number INA000002785. Several alleged infractions of SEBI's (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, IA rules and regulations, and circulars were found throughout the examination. Monetary Solutions received show-cause warnings from SEBI for the infractions found during the examination. After carefully reviewing the material, the regulator's adjudicating official, Barnali Mukherjee, concluded that the business had committed the violations.[ii]
Regulatory Breach
Serious infractions were found during the inspection, such as using fictitious testimonials and inaccurate depictions of the company's prior success on the website. Barnali Mukherjee, the adjudicating officer for SEBI, pointed out that Monetary Solutions had misrepresented its investment advice by showing gains that needed to be made. The purpose of this dishonest approach was to draw in prospective customers and persuade them to consult the company. Furthermore, the company omitted links that would have allowed clients to file complaints through the SEBI Complaints Redress System (SCORES) and neglected to disclose important information like the investor charter. These activities went against the IA rules' Code of Conduct in addition to the Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations.
Investigation Process and Repercussions
SEBI sent show-cause notices to Monetary Solutions after the inspection, then published their responses to the allegations following the adjudication. The adjudicator extensively examined the case against the firm from these sources: the evidence found during the inspection (firm’s promotional material, client communications, etc); regulatory guidelines; and comments from Monetary Solutions. The firm, SEBI found, had little transparency or accountability and was not abiding by the regulations around record-keeping.
For the Indian securities market, SEBI serves as a crucial market watchdog. It is SEBI's responsibility to safeguard investor interests, stop unfair and deceptive trading practices, and encourage the growth of honest and open trading standards. One instance of how market regulators can be proactive in enforcing, imposing, and carrying out fines against market participants is the decision made by SEBI to punish Monetary Solutions. The violations identified against Monetary Solutions were that they did not have sufficiently trained personnel, they did not maintain the appropriate records, and they made misleading marketing claims. People who seek financial advisory services typically transact repeat business, often over long periods. Non-compliance can seriously disrupt relationships built on credibility and reliability. [iii]
Conclusion
SEBI fining Monetary Solutions Rs 25 lakh highlights the importance that SEBI accords to regulatory compliance in the realm of financial advisories. Apart from seeding enforcement actions, the market watchdog also ensures that the integrity of the securities market is preserved, and investors in the market are covered and secured. Violations, such as those made in the current case, should work as a reminder to investment advisers to keep up with the highest ethical standards and be in conformity with regulatory requirements. Monetary Solutions complication underscores that investment advisers should deal with their clients transparently and ethically, and ensure that robust compliance systems are in place as part of the core strategy of the business.
Reference
1.Sebi Slaps ₹25 Lakh Fine On “Monetary Solutions” For Violating Market Norms, https://www.freepressjournal.in/business/sebi-slaps-rs-25-lakh-fine-on-monetary-solutions-for-violating-market-norms (last visited Jul 20, 2024)
2.SEBI Slaps Rs 25 Lakh Fine on Monetary Solutions for Violating Market Norms | Pragativadi | Odisha News, Breaking News Odisha, Latest Odisha News, https://pragativadi.com/sebi-slaps-rs-25-lakh-fine-on-monetary-solutions-for-violating-market-norms/ (last visited Jul 20, 2024)
3.Sebi fines Monetary Solutions with Rs 25 lakh for violating market norms, https://www.business-standard.com/markets/news/sebi-slaps-rs-25-lakh-fine-on-monetary-solutions-for-violating-market-norms-124071501244_1.html (last visited Jul 20, 2024
[i] Order/BM/GN/2024-25/30571
[ii] Sebi Slaps ₹25 Lakh Fine On “Monetary Solutions” For Violating Market Norms, https://www.freepressjournal.in/business/sebi-slaps-rs-25-lakh-fine-on-monetary-solutions-for-violating-market-norms (last visited Jul 20, 2024)
[iii] Sebi Slaps ₹25 Lakh Fine On “Monetary Solutions” For Violating Market Norms, https://www.freepressjournal.in/business/sebi-slaps-rs-25-lakh-fine-on-monetary-solutions-for-violating-market-norms (last visited Jul 20, 2024)
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