Sebi’s rap on the knuckles: Investment adviser pulled up for routing client money through employee account

Market regulator Securities and Exchange Board of India (SEBI) has reprimanded an investment advisor for multiple violations of the Investment Advisers regulations, including routing client funds through the personal bank account of an employee.

In a 16-page order, Sebi directed Winway Research’s proprietor Ankur Jain to be diligent and careful in his dealings as an Investment Adviser. The regulator found Jain charging fees for the same product for overlapping durations; receiving money from the client in the personal bank account of his employee; failure to maintain call records and to submit call records to Sebi and non-resolution of SCORES complaints.

The order was passed after an enquiry report was submitted to the regulator on November 18, 2024, following certain complaints against Jain on the SCORES portal. Sebi conducted an examination of the complaints to ascertain if the applicable regulatory compliances were being followed by the accused.

In his defence, Jain told SEBI that his firm does not accept client fees in any third-party bank accounts, a policy clearly stated in its agreements, invoices, and on its website. He denied allegations of funds being routed to employees’ personal accounts, claiming that certain former employees misused company credentials to carry out unauthorised activities without the firm’s knowledge.

Jain argued that the firm cannot be held responsible for the independent actions of ex-employees, citing the absence of vicarious liability, and said SEBI had already been informed about individuals issuing fake invoices using the firm’s name.

On charging fees for overlapping periods, Jain said that the allegation that a client was sold services for overlapping periods was due to lack of understanding of the invoicing system before the amendment of 2020 as at that point, a combined bill was raised for all the services. “The client subscribed for a combination of services and thus, it does not mean that the client was charged for overlapping periods,” the order said, citing Jain’s submission to the regulator.He further argued that the firm made all reasonable efforts to maintain and provide call recording as required by Sebi but certain data became unavailable due to technical failures, beyond his control.However, Sebi rejected the arguments.(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)