Description

SEBI order under Section 12(3) of SEBI Act, 1992 against Capital Vraddhi Financial Services for multiple violations of Investment Advisers Regulations during inspection period April 2020 to March 2022.

Summary

SEBI issued an order under Section 12(3) of the SEBI Act, 1992 read with Regulation 27(5) of the SEBI (Intermediaries) Regulations, 2008 against Capital Vraddhi Financial Services (Proprietor: Mr. Raju Jhariya), a registered Investment Adviser (Registration No. INA000005291). The order stems from an enquiry report dated October 23, 2024, following a comprehensive inspection for the period April 1, 2020 to March 31, 2022. Multiple violations of SEBI (Investment Advisers) Regulations, 2013 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 were identified.

Key Points

  • Noticee: Capital Vraddhi Financial Services, Proprietor- Mr. Raju Jhariya (PAN: AQKPJ9329B)
  • Registration Number: INA000005291
  • Inspection Period: April 1, 2020 to March 31, 2022
  • Order Authority: Whole Time Member under Section 12(3) of SEBI Act, 1992
  • Enquiry Report Date: October 23, 2024
  • Total Violations Identified: 9 major categories of non-compliance

Regulatory Violations

The following violations were alleged against the Investment Adviser:

  1. Lack of Requisite Qualification - Violation of Regulation 15(13) read with Regulation 7 of IA Regulations and Clauses 1, 2, and 8 of the Code of Conduct

  2. Non-Compliance with Fee Structure - Violation of Regulation 15A of IA Regulations read with SEBI Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/182 dated September 23, 2020 and Clause 6 of the Code of Conduct

  3. Agreement with Clients - Violation of Clause 2(iii) of SEBI Circular dated September 23, 2020 and Clauses 1 (Honesty and fairness) and 2 (Diligence) of the Code of Conduct

  4. Non-Maintenance of Records - Violation of Clause 2(vi) of SEBI Circular dated September 23, 2020 read with Regulation 19(1) of IA Regulations

  5. Not carrying out Risk Profiling and Suitability Assessment - Violation of Regulations 16 and 17 of IA Regulations read with Clauses 1, 2, and 8 of Code of Conduct

  6. Similar Products sold for concurrent Period - Violation of Regulation 15(1) of IA Regulations and Clauses 1 and 2 of Code of Conduct

  7. Providing free trials to 116 clients - Violation of Regulations 3(a), (b), (c) and (d) of PFUTP Regulations read with Section 12A(a), (b) and (c) of SEBI Act, 1992

  8. Employees using personal phone number for pitching advisory services - Violation of Clause 1(i) of SEBI Circular No. SEBI/HO/IMD/DF1/CIR/P/2019/169 dated December 27, 2019 and Clauses 1 and 2 of Code of Conduct

  9. Fake Reviews about IA through blog - Violation of Clauses 1 and 2 of the Code of Conduct

Compliance Requirements

Investment Advisers are required to:

  • Maintain requisite qualifications as per Regulation 7 and 15(13) of IA Regulations
  • Comply with prescribed fee structures per Regulation 15A and applicable circulars
  • Execute proper agreements with clients as per regulatory format
  • Maintain comprehensive records as mandated under Regulation 19(1)
  • Conduct proper risk profiling and suitability assessment per Regulations 16 and 17
  • Avoid selling similar products for concurrent periods
  • Not provide unauthorized free trials
  • Ensure employees use only official communication channels
  • Maintain honest and fair practices in all promotional activities

Important Dates

  • Inspection Period: April 1, 2020 to March 31, 2022
  • Noticee Response Date: January 2, 2023
  • Enquiry Report Date: October 23, 2024
  • Order Issue Date: November 19, 2025

Impact Assessment

Market Impact: Low - This is a specific enforcement action against one investment adviser and does not have broader market implications.

Industry Impact: Medium - Serves as a reminder to all registered Investment Advisers about compliance requirements under IA Regulations, 2013, PFUTP Regulations, and various SEBI circulars.

Compliance Impact: High for the specific intermediary - The order highlights systemic compliance failures across multiple areas including qualifications, client agreements, record-keeping, risk profiling, fee structure, and business practices.

Investor Protection: The action reinforces SEBI’s commitment to ensuring investment advisers maintain proper standards and follow prescribed regulations to protect investor interests.

Impact Justification

Regulatory enforcement action against a specific investment adviser. Important for industry compliance awareness but limited direct market impact as it affects one intermediary.