Sebi’s Surgical Strike: Market Regulator Slaps Fine On Basant Maheshwari Wealth LLP - Know Why

The Securities Exchange Board of India has initiated action against Basant Maheshwari Wealth LLP. The market regulator has penalised the portfolio management company for violating regulations related to fees, and for not complying with Sebi’s regulations for posting online content.

“Observed by SEBI that the Noticee had allegedly violated various provisions of SEBI(Investment Advisers) Regulations, 2013{“SEBI IA Regulations, 2013” / “SEBI IA Regulations” / “IA Regulations”}, and circular issued by SEBI 1992,” Sebi said.

Why Did Sebi Initiate Action

The regulations violated by the portfolio management company include various provisions of the SEBI (Investment Advisers) Regulations, 2013. The market regulator has initiated adjudication proceedings against the LLP. The market regulator has initiated action against the portfolio management company on the basis of an inspection conducted between October 2023 and December 2023. Notably, the Sebi and the BSE Administration and Supervision Ltd conducted the inspection.

Fee Norm Violation

The Sebi alleged that Basant Maheshwari Wealth LLP was charging fees from as many as 32 clients under both the Assets under Advice (AuA) and fixed fees mode. Charging fees in such a manner is barred by the Sebi under Regulation 15A of the market regulator’s Investment Advisers (IA) Regulations.

As per Sebi’s Investment Advisers (IA) Regulations fees can be charged by investment advisers under either of the two modes and not under both modes simultaneously.

Content Related Violations

The market regulator said that in its two-month inspection it found that Basant Maheshwari LLP was uploading videos on its YouTube channel with “exaggerated captions”. Notably, the use of such captions is a violation of Sebi’s “advertisement code".

Sebi said in its enforcement order that Basant Maheshwari LLP has flagged the violation in the following captions:

1. 100x Portfolio -3 Saal Mei? Kaise Kiya?

2. 10 Saal Mei 10 Guna Aur 20 Saal Mei 100 Guna!! Kaise Kare??

3. 1 Crore Ko Double Kaise Kare?? Explained in 2 Minutes

5.Kaise Banaya ₹150 crores Sirf Trading kar ke ?

The wealth management company has responded to the allegations made by the market regulator and stated that its videos were uploaded for"knowledge enrichment for the general public". However the response has been dismissed by Sebi.

"Additionally, the videos uploaded by Mr. Basant did not provide the disclaimer in the description box of each of his YouTube videos," the order added. It was further observed by SEBI that the videos had been providing links to his "smallcase" website in the description of his youtube channels with the statement 'Invest in our smallcase'," Sebi said.

The market regulator alleged that the portfolio management company was influencing investors and using YouTube videos to advertise its own website. Such advertisement is a violation of the norms mentioned in SEBI's master circular issued on June 15, 2023. The circular states that advertisements should not contain statements which are false, misleading, biased or deceptive.

Penalty Imposed On Basant Maheshwari Wealth LLP

A fine of Rs 4 lakh has been imposed on Basant Maheshwari Wealth Advisers LLP for violating Sebi norms. The wealth management company will need to mandatorily submit the penalty amount within 45 days. Sebi said that if Basant Maheshwari Wealth LLP fails to submit the penalty amount within the 45-day time period, the market regulator will impose interest, and could also initiate action for attachment of movable and immovable properties.

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