SAT directs trading guru Avadhut Sathe to deposit Rs 100 crore in case against SEBI

SAT directs trading guru Avadhut Sathe to deposit Rs 100 crore in case against SEBI

• SAT grants partial relief to Avadhut Sathe, modifies SEBI's Rs 546 crore order.
• Sathe must deposit Rs 100 crore; restrictions lifted upon compliance
• SAT order removes market and bank restrictions if deposit is made

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Securities Appellate Tribunal (SAT) has given partial relief to Avadhut Sathe and his trading academy against SEBI’s December 4 order of impounding Rs 546 crore and imposing restrictions on trading in the market, along with a debit freeze on bank and demat accounts. In an order pronounced today, the tribunal directed Sathe and his academy to make a fixed deposit of Rs 100 crore in a bank account, with a lien marked in favour of the market regulator, the Securities and Exchange Board of India (SEBI).

The Presiding Officer of SAT, Justice P.S. Dinesh Kumar, pronounced that, “Appeal allowed in part; direction in paragraph 83(ix) is modified, and it is ordered that the directions stipulated in paragraphs 83(iii), 83(vi) and 83(vii) shall cease to apply upon the appellants depositing a sum of Rs 100 crores in terms of direction 83(v).” The tribunal also directed them to file a compliance affidavit in this regard. If complied with, these directions will remove restrictions on operating in the market, selling securities, investments made in mutual funds, and debit restrictions on bank accounts.

SAT not only directed to deposit the money but also restrained from selling fixed assets. SAT order noted, "In view of the fact that fixed assets are worth Rs 100 Crores, taking into consideration the tax component of Rs 166 Crores, in our view, ends of justice would be met by directing the appellants to deposit a sum of Rs 100 Crores in the bank and restraining them from alienating the fixed assets".

SAT relied on the arguments and material placed by SEBI. SAT order stated, "SEBI has placed on record the factual matrices of the case and the material seized during the search and seizure operation which also include the testimonials. Thus, SEBI has made out a prima facie case of violation of IA and RA

Regulations".

Through the directions mentioned in the SAT order, SEBI had ordered Sathe and his academy, ASTA (Avadhut Sathe Trading Academy), to deposit a sum of Rs 546 crore, deemed to be alleged illegal gains earned from providing unregistered investment advisory services. SEBI had also barred them from the market until further orders and restricted debit transactions in bank and demat accounts.

SAT further directed Sathe and ASTA to file an affidavit before the whole time member (WTM) of SEBI, disclosing the full details of their assets with a valuation certificate by a SEBI certified valuer and also  undertake not to alienate the fixed assets without the permission of the WTM. SEBI also made it clear that any observation made in this order is only for the purpose of adjudication of this appeal and

the  WTM shall pass his final order wholly without being influenced by this order. SAT order also said that SEBI WTM should  pass his final order as expeditiously as possible.

ASTA said its revieweing the SAT order. A spokesperson said, “We respect the order passed by the Honourable Securities Appellate Tribunal. Our legal team is reviewing the order, after which we will initiate appropriate action.”

SEBI, Whole Time Member, Kamlesh Chandra Varshney, in the interim order, had accused Sathe and his academy of giving stock tips to students without registering with the regulator as a research analyst (RA) or investment adviser (IA). SEBI had also alleged that Sathe’s academy was luring students with misleading advertisements on earning from trading after learning from his academy. Before SAT, SEBI pointed out that when nine out of ten retail traders are losing money in the derivatives frenzy, giving trading tips to students without understanding their financial position cannot be justified.

Sathe’s side strongly denied the allegations and questioned the impounding order of Rs 546 crore. His counsel said there was no such fund left or kept in bank accounts, as the amount had been spent on establishing and running the academy, paying taxes and levies to the government, and on welfare activities such as corporate social responsibility.

Sathe’s side also denied allegations of giving stock tips and said SEBI had relied on selective WhatsApp chats to build its case without understanding the context of the communication. They also disputed SEBI’s claims regarding wrong testimonials and said students were indeed making profits. On the use of live charts in training, Sathe’s side compared the conduct of training at the academy to the training of surgeons, where theoretical knowledge alone does not help.  After hearing both sides, SAT had reserved its order on Monday.