Agrich Traders Banned by SEBI for Running Illegal Investment Advisory
Moneylife Digital Team 25 January 2023
Securities and Exchange Board of India has banned Agrich Traders and its proprietor Prakash Shyamlal Rathod from the market for six months, for offering investment advisory to investors without obtaining registration from the market regulator.
In an order, SK Mohanty, whole-time member of SEBI, says "After holding that Agrich Traders was running an unauthorised investment advisory service through which it had lured numerous gullible retail investors to subscribe to its service packages, who are the most vulnerable sections of the participants of the securities market, as the regulator, it is an avowed duty of SEBI to protect the interest of such investors."
"As the firm has failed to provide specific details of the funds collected by it for its unauthorized investment advisory services which were credited into its two bank accounts, I take the entire amount of funds received by it through the said two bank accounts, which amounts to Rs1.26 crore treating the same as the funds collected by it from its unauthorized investment advisory services only. The only method I find feasible to redeem the investors is to direct the firm to repay such funds collected from the investors," the order says.
The case is related to a complaint, received by SEBI through email on 6 May 2020, which alleged that Agrich Traders are engaged in illegal advisory services.
After perusing agrichtraders.com, SEBI found that the firm has been offering investment advisory services. It was offering packages of advisory in stock trading, investment in cash, futures & options (F&O) segments to its clients as part of its investment advisory services. It was observed from the website of the firm that under the head payment details, the firm was providing its bank details via SMS. SEBI also found that the firm acted as an advisory without prior registration.
The firm had Rs1.26 crore in its two bank accounts.
After its investigation SEBI issued a show-cause notice (SCN) to Agrich Traders and its proprietor Mr Rathod.
In his reply, Mr Rathod, however, denied all the allegations against him. He claimed that one of his friends along with a person Bhupendra Haswani took his PAN card, Aadhaar and one blank signed cheque to obtain a loan for him. He also alleged that they made him sign some documents first at IDFC First Bank and then at Bank of Baroda.
He also contented that money in his account belongs to one Sanjay Alia, who was a contractor and used to credit money in his bank account so that he could pay the other workers who used to work under him.
However, Mr Mohanty from SEBI observed that Mr Rathod has failed to produce any evidence which would show that he was in touch with Mr Haswani or his friend either by way of call data records or SMS or WhatsApp messages, during the period when he was seeking help for a loan or afterward when Mr Haswani was not returning his personal identification documents to him.
SEBI noted that a complaint was filed against Mr Haswani only after the issue of the interim order. Thus, the argument from Mr Rathod about being cheated by Mr Haswani was dubious, the WTM says.
"Further perusal of bank statements proved that the money credited to accounts was withdrawn from ATMs on the very same day. This can only be performed by Mr Rathod who handled the ATM card. Despite receiving message alerts on the crediting of money in his account no steps to make an inquiry or complaint," the SEBI order says.
The WTM of SEBI then banned Agrich Traders and Mr Rathod from markets for six months and directed them to refund money worth Rs1.26 crore collected from investors as fee.
(WTM/SM/WRO/WRO/23094/2022-23 Date: 23 January 2023)
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