Is Sebi trying a new tactic to crack down on unregistered advisories?

Such warning letters are issued for cases that fall under Sebi (PFUTP) Regulations and Sebi (PIT) Regulations, when they fall below a threshold, according to an expert.

The market regulator seems to be trying a new way to crack down on unregistered investment advisories.

Over the last month, regional offices of the Securities and Exchange Board of India (Sebi) have been issuing warning letters to entities providing such a service. Usually, Sebi investigates complaints related to such activity and passes orders. Issuing warning letters seems like a new tactic.

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A legal expert told Moneycontrol that such warning letters are issued for cases that fall under Sebi (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations and Sebi (Prohibition of Insider Trading) Regulations, when they fall beneath a certain threshold. But even the expert hasn't seen this being followed by the regulator for cases that come under Investment Advisor (IA) Regulations.

According to him, the letters can alert investors to the presence of such fraudulent activity, and does not preclude legal action.

The latest warning letter, dated February 27, is the fifth such issue this month.

Through it, Sebi's Indore office has issued a warning to proprietors of two establishments for operating as unregistered IAs.

The proprietor of Exact Key, Mahendra Singh Kushwah, and of Exaalgia IT Solutions, Satish Singh Parmar, have been warned that action will be initiated against them if they continue to do such activities.

The others were issued on February 21 (Manik Katyal, proprietor of Earn in Hidden Gems), February 20 (Rishabh Singh, proprietor of Intracapitals.com, and Deepak Chouhan, proprietor of Dream Research Services) and February 8 (Garima Gupta, proprietor of SNT Consultants).

The text of the letters are similar.

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As the latest warning letter, issued to Kushwah and Paramar, read: "It has come to our notice that Exact Key (Proprietor - Mr Mahendra Singh Kushwah {PAN - CJJPK6931L}) and Exaalgia IT Solutions (Proprietor - Mr Satish Singh Parmar {PAN-AXJPP8183B}), were involved in providing unregistered investment advisory related services in securities market through the website www.exactkey.com without obtaining registration from SEBI under the capacity of Investment Advisor. The said unregistered activity was in violation of various provisions/sections of SEBI Act, 1992, SEBI Regulations, Rules and Circulars made thereunder."

It added, "The aforesaid unregistered invesment advisory activity carried out by Exact Key (Proprietor - Mr Mahendra Singh Kushwah) and Exaalgia IT Solutions (Proprietor - Mr Satish Singh Parmar) has been viewed very seriously and you are therefore warned to be careful in future and not to indulge in any kind of unregistered securities market related activity, failing which action may be initiated in accordance with provisions of SEBI Act, 1992 and Regulations, Rules and Circulars made thereunder."