Description

SEBI final order against Mr. Madhav Tiwari for conducting unregistered investment advisory activities through Divinecommodity.co, addressing refund computation and penalties.

Summary

SEBI has issued a final order under sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of the SEBI Act, 1992 against Mr. Madhav Tiwari (PAN: AGZPT6444J), proprietor of Divinecommodity.co, for conducting unregistered investment advisory activities. This order follows an earlier SEBI order dated September 20, 2024, which the Noticee challenged before the Securities Appellate Tribunal (SAT) regarding the computation of refund amounts.

Key Points

  • Mr. Madhav Tiwari admitted to acting as an investment advisor without SEBI registration
  • The Noticee knowingly misrepresented himself as a SEBI registered entity
  • Collected funds from investors with fraudulent assurance of guaranteed returns
  • Original SEBI order (September 20, 2024) directed refund of INR 1,70,12,615 to investors
  • Noticee challenged the refund amount, claiming only INR 9,66,207 was from advisory services
  • Noticee argued other amounts were from SEO, real estate, and astrology services
  • Violations include section 12(1) of SEBI Act read with regulation 3(1) of IA Regulations, 2013
  • Additional violations of section 12A(a), (b), (c) of SEBI Act and PFUTP Regulations
  • Original order imposed penalties of INR 5,00,000 under section 15HA and INR 1,00,000 under section 15EB
  • 2-year market ban imposed until refund completion, whichever is later

Regulatory Changes

No new regulatory changes introduced. This order reinforces existing regulations prohibiting unregistered investment advisory activities and fraudulent practices in securities markets.

Compliance Requirements

  • Investment advisors must hold valid SEBI registration certificate before providing advisory services
  • Entities must not misrepresent themselves as SEBI registered when they are not
  • Prohibition on fraudulent assurance of guaranteed returns to investors
  • Refund obligations for amounts collected through unregistered advisory activities
  • Compliance with SEBI (Investment Advisers) Regulations, 2013
  • Compliance with SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003

Important Dates

  • September 20, 2024: Original SEBI order issued
  • February 6, 2026: Current circular/order published
  • Market ban period: 2 years from original order date or until refund filing, whichever is later

Impact Assessment

Investor Protection: The order protects investors who were defrauded by unregistered advisory services and ensures refund mechanisms are in place.

Market Integrity: Reinforces SEBI’s zero-tolerance approach to unregistered investment advisors and fraudulent practices, deterring similar violations.

Industry Impact: Serves as a warning to other unregistered entities operating investment advisory businesses without proper authorization.

Dispute Resolution: The SAT appeal focuses on proper computation of refund amounts, distinguishing between investment advisory income and other business revenues (SEO, real estate, astrology services).

Enforcement Precedent: Demonstrates SEBI’s comprehensive enforcement approach including refunds, penalties, and market bans for serious violations involving investor fraud.

Impact Justification

High severity enforcement action against unregistered investment advisor with significant penalties and market ban, but low market-wide impact as it affects only one individual entity and its clients