An investment advisor who charged his clients above the permitted limit and who failed to have the PAN details of two-third of his clients has been fined by the market regulator.
In an order dated September 15, the Securities and Exchange Board of India (Sebi) fined Manu Chhabra Rs 4 lakh.
Chhabra was found to have charged one of his clients Rs 5.16 lakh in one month (January 2022) even though the maximum permitted fee is Rs 1.25 lakh for that period, according to guidelines and regulations for investment advisors.
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He also could not produce PAN details of 107 of his 157 clients.
The order said, “The reasons stated by the Noticee such as data corruption issues and refusal by the clients to provide the details cannot be accepted. I (the adjudicating officer) hold that the Noticee (Manu Chhabra) is a SEBI registered intermediary and it cannot absolve its responsibility in compliance with securities laws.”
Chhabra had collected a total fee of over Rs 36.79 lakh from 157 clients. Out of this, around Rs 12.06 lakh were collected from the 50 clients whose PAN details were submitted. The remaining Rs 24.73 lakh came from 107 clients whose PAN details were not available with the advisor.
The order stated, “It is relevant to mention that PAN details are an important requirement even for the Anti-Money Laundering (AML) policy purposes.”
On the excessive fee, the advisor had submitted that the violation had occurred due to linkage of performance and fixed fee. The Sebi order stated that “this (explanation) cannot be accepted as the provisions of securities laws in this regard (mentioned in previous paragraphs) clearly mandate Investment Advisers to charge fees from the clients in either of the two modes.”
Chhabra’s submissions that he has been taking steps to prevent such incidents from occurring in the future was taken into consideration by the regulator when deciding the penalty.
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