The appellate tribunal also allowed ASTA and Sathe to buy, sell or deal in securities after the Rs 100 crore amount is deposited. They will also be able to make debits from their bank accounts.
ASTA, Avadhut Sathe and Gouri Sathe had earlier been asked by Sebi to deposit Rs 546.16 crore on the allegation that they ran an unregistered investment advisory and research analysis entity.
“The appeal is allowed in part,” the 17-page order said.
The appellate tribunal in its order noted that Sebi has made out a case against the accused for alleged violations of Investment Adviser (IA) and Research Analyst (RA) Regulations, rejecting the plea to set aside the Sebi order.
“Having held that SEBI has made out a prima facie case of violation of IA and RA Regulations, what remains for consideration is whether the amount sought to be impounded is justified. It is not in dispute that appellants have collected ₹601 Crores. Whether it is an unlawful gain, is yet to be decided. According to SEBI’s calculation a sum of ₹546 Crores needs to be secured. As noted above, a sum of ₹166 Crores is lying in the Government treasury and there are fixed assets worth ₹100 Crores. This accounts for ₹266 Crores. If this amount is deducted from ₹546 Crores, the remaining amount is ₹280 Crores. Mr. Dwarkadas Pleaded that the order be set aside and the appellants be permitted to file their reply. In our considered
opinion, in view of our finding that SEBI has made out a prima facie case of violation of IA and RA Regulations, the appellants shall not be entitled for such a relief,” the order said.
“However, in view of the fact that fixed assets are worth ₹100 Crores, taking into consideration the tax component of ₹166 Crores, in our view, ends of justice would be met by directing the appellants to deposit a sum of ₹100 Crores in the bank and restraining them from alienating the fixed assets,” the order read further.
The order also clarifies that SAT has not rendered any finding regarding the tax component and the same is kept open for consideration in an appropriate case.
On January 9, SAT allowed ASTA to continue its operations while directing Sebi to instruct the banks to allow ASTA to draw Rs 2.25 crores for this month’s expenditure.
ASTA’s counsel Janak Dwarkadas told the tribunal that Sebi “passed a sentence without a trial”, by not giving an opportunity of hearing before passing an ex-parte order.
The senior counsel said that the Sebi order came following “complaints of only 12 students” against 3.5 lakh students, who have been imparted training at the Avadhut Sathe Trading Academy.
ASTA is a Karjat-based academy which calls itself as a community-driven platform for skill building in financial markets.
Sebi order
“From the findings of the investigation, it is clear that none of noticees (Avadhut Sathe and his Avadhut Sathe Trading Academy) are registered with Sebi as investment advisor or research analyst. However, despite being not registered, noticees have been providing investment advisory and research analyst services under the guise of their stock market training programs to a large number of investors,” Sebi whole time member Kamlesh Varshney said in his 125- page order passed on December 4.
The regulator said they have collected Rs 601 crore from more than 3.37 lakh investors.
“The noticees have been recklessly misleading, soliciting and inducing the investors to deal in the securities market on the basis of investment advice and stock analysis without having the requisite registration certificate as mandated under securities laws,” Sebi member said.
Further, they have been barred from using live stock exchange data for any purpose and from advertising performance of profits of themselves or their course participants.
Sebi received complaints that Sathe and his academy selectively showcased only profitable trades of course participants and thereby misled course participants regarding actual trading performance.
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