SAT fines Sebi Rs 10 lakh for “failing” to investigate investor complaints against broker

Investors complained that the brokerage and its AP had promised them assured returns through two schemes.

The capital markets regulator SEBI has been fined Rs 10 lakh by the Securities Appellate Tribunal (SAT) for “failing” to investigate a broker sufficiently, in a recent order. SEBI has been asked to complete the investigation within three months from the date of the order (July 24).

The Securities and Exchange Board of India (Sebi) had investigated Ventura Securities Limited (VSL) and its authorised person (AP) Ameet Savant following complaints by investors that the brokerage and its AP had promised them assured returns through a fixed income scheme.

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According to the SAT order, investors had put in large sums of money — Rs 5.85 crore by one investor group and Rs 2.4 crore by a second investor group — in VSL through Savant from May 2016 to October 2018. The first group invested in a fixed-income scheme with a return of 2 percent, while the second group invested in an index option scheme with a stop loss of 4 percent. After an initial lock-in period, the schemes had an open option of redemption.

Initially, the investors received various amounts but later their redemption requests were stonewalled. Therefore, they filed complaints with the NSE and Sebi and also filed commercial summary suits in the Bombay High Court.

The SAT order noted that Sebi and NSE closed the complaints holding that the investors were not registered with the broker (VSL) and that their money was with Savant.

Savant was being investigated by Sebi and the Economic Offences Wing (EOW), Goa. As the investors had filed commercial summary suits with the Bombay HC and since the matter was sub-judice, the complaints were treated as closed.

The investors then filed an appeal with SAT and, in January 2021, the tribunal remitted the matter back to Sebi to reconsider the complaints.

The Tribunal’s order stated, “Whether Ameet Savant had received money as a proprietary concern or on behalf of the principal, namely, Ventura is something which is required to be investigated. The appellants have alleged that the monies given to Ameet Savant eventually came into the accounts of Ventura. This fact also required to be investigated. The mere fact that Ameet Savant is separately been investigated by SEBI is not sufficient. These complaints cannot be disposed of in a summary manner.”

However, Sebi’s communication dated March 17, 2021, indicated that the matter was not indicated according to the SAT order.

The SAT order stated, “Despite a clear direction that their complaints cannot be disposed of in a summary manner, the case was disposed off summarily without carrying investigation as to whether Ameet Savant received monies from the appellants as a proprietary concern or on behalf of VSL or whether monies given to Ameet Savant eventually went into accounts of VSL.”

The order added that VSL had admitted to receiving some of the investors’ money through Savant and that NSE had communicated to the Economic Offences Cell (Goa) that there had been non-compliance by the broker. The exchange’s letter also indicated that there were more complaints made against the broker and Savant.

The tribunal’s order stated, “Prima facie, it appears that VSL is involved with Ameet Savant and that the amount received by Ameet Savant was on behalf of VSL. It thus, appears that both VSL and Ameet Savant were indulging in fraudulent and unfair trade practices, which needs to be investigated under the Securities Laws.”

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“The fact that the appellants have filed suit for recovery of money has nothing to do with violation of the Securities Laws,” The tribunal added.

Therefore, SAT said that there was sufficient ground for Sebi to hold a detailed investigation and/or NSE to investigate the complaints.

SAT has asked Sebi to register complaints made by the investors and conduct a detailed investigation within the given timeline, along with asking the regulator to deposit the fine with the Registrar of the Tribunal within one month.