Miscellaneous Order in the matter of Anirudh Sethi

WTM/AB/IMD /DoF - 1/14435/2021-22

SECURITIES AND EXCHANGE BOARD OF INDIA

MISCELLANEOUS ORDER

In respect of:

S. No. Name of Entity PAN

1. Anirudh Sethi ANBPS5743A

Pursuant to order dated July 29, 2021 passed by Hon’ble Securities Appellate
Tribunal, Mumbai

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) vide an

order dated March 16, 2018 (hereinafter referred to as “Final Order”) passed
against Mr. Anirudh Sethi (hereinafter referred to as “the Applicant”) for acting as
an unregistered investment advisor and unregistered research analyst in violation
of Section 12(1) of Securities and Exchange Board of India Act, 1992 (hereinafter
referred to as “SEBI Act, 1992”), Regulation 3(1) of the Securities and Exchange
Board of India (Investment Advisers) Regulations, 2013 (hereinafter referred to as
“IA Regulations”) and Regulation 3(1) of Securities and Exchange Board of India
(Research Analyst) Regulations, 2014 (hereinafter referred to as “RA
Regulations”), issued certain directions against the Applicant as mentioned in the
order. Vide the said Final Order following directions were issued:

“a. Mr. Anirudh Sethi shall forthwith refund the money received from its clients as
fees/profit sharing/compensation in any other form, in respect of its unregistered
investment advisory activities and unregistered research analyst services.

b. Mr. Anirudh Sethi shall issue public notice in all editions of two National Dailies
(one English and one Hindi) and in one local daily with wide circulation, detailing

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the modalities for refund, including the details of contact persons such as names,
addresses and contact details, within 15 days of this Order coming into effect.

c. The repayments to the clients shall be effected only through Bank Demand Draft
or Pay Order both of which should be crossed as “Non-Transferable” or through
any other appropriate banking channels with clearly identified beneficiaries.

d. Mr. Anirudh Sethi is directed not to divert any funds raised from investors, kept in
bank account(s) and/or in his custody, except for the purpose of refunds to the
clients. The Banks and Depositories are directed that no debit shall be made,
without permission of SEBI, in respect of the bank accounts and demat accounts,
held jointly or severally, by Mr. Anirudh Sethi.

e. After completing the aforesaid repayments, Mr. Anirudh Sethi shall submit a
certificate from a peer reviewed Chartered Accountant who is in the panel of any
public authority or public institution, within a period of 3 months from the date of
service of this order. For the purpose of this Order, a peer reviewed Chartered
Accountant shall mean a Chartered Accountant, who has been categorized so by
the Institute of Chartered Accountants of India ("ICAI") holding such certificate.

f. In case of failure of Mr. Anirudh Sethi to comply with the aforesaid directions,
SEBI, on the expiry of three months period from the date of this Order may
recover such amounts, from Mr. Anirudh Sethi as specified in paragraph 48(a) of
this Order, in accordance with section 28A of the SEBI Act including such other
provisions contained in securities laws.

g. Mr. Anirudh Sethi is directed not to, directly or indirectly, access the securities
market, and is prohibited from buying, selling or otherwise dealing in the
securities market, directly or indirectly in whatsoever manner, till the expiry of 4
years from the date of refund. Mr. Anirudh Sethi is also restrained from
associating with any listed public company and any public company which intends
to raise money from the public, or any intermediary registered with SEBI till the
expiry of 4 years from the date of refund.

h. Mr. Anirudh Sethi shall not undertake, either directly or indirectly, investment
advisory services, research analyst services or any activity in the securities
market without obtaining a certificate of registration from SEBI as required under
the securities laws after the expiry of period of debarment as mentioned in
paragraph 48(g).”

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2. Aggrieved from the aforesaid Final Order passed by SEBI, Mr. Anirudh Sethi filed
an appeal (Appeal No. 390 of 2018) before the Hon’ble Securities Appellate
Tribunal, Mumbai (hereinafter referred to as “Hon’ble SAT”) challenging the Final
Order. Hon’ble SAT vide its order dated July 29, 2021 inter-alia set aside the
direction to refund Rs. 7,35,06,557/- to the clients and remitted the matter back to
SEBI for arriving at a specific amount to be credited by the Applicant to the Investors
Protection and Education fund established by SEBI. Hon’ble SAT while passing the
aforesaid directions made the following observations relating to the directions to
refund the subscription amount to investors:

“12. We further find that the amount collected by the appellant is of the period from
2013 to 2016 from various clients in the nature of subscription, towards seminar etc.
The amount is retail amount, collected from numerous investors and that now it
would not be practical to trace these subscribers/ clients and to refund the amount
to them.”

3. In compliance with the direction given in the order dated July 29, 2021 passed by
Hon’ble SAT, the Applicant had deposited Rs. 12 lakhs on August 20, 2021 in the
Investor Protection and Education Fund established by SEBI and Rs. 20 Lakhs on
September 14, 2021 in an interest bearing account. The Applicant furnished the
material for arriving the figure of the subscription amount collected by him by
providing ‘investment advisory services’, on November 22, 2021.

4. Vide application dated November 22, 2021, the Applicant has submitted inter-alia
as under:
“………………………………………………………………………………………..
i. During the period October 22, 2013, till April 2016, the total of credit entries in my bank
account was Rs.7,41,03,012 The said credit entries in my bank account do not pertain
only to fee amounts received from the subscribers, but various credit entries which are

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other than the fee amounts received from the subscribers viz. housing loans raised,
interest amounts received etc.

ii. As per the credit entries of Rs 36,000/- in my bank account (allegedly collected from
various clients under the scheme called "Fatal Attraction" without obtaining registration)
during the period October 22, 2013 till April 20, 2016, the total subscription amount
allegedly collected by me works out as follows:

Period Amount (in Rs)

22.10.13 to 31.3.14 9,72,000/- (Nine Lakh Seventy-Two Thousand Only)
14.14 to 31.3.15 72,000/-(Seventy-Two Thousand Only)
14.15 to 20.4.16 1,08,000/- (One Lakh Eight Thousand Only)
Total Refund Amt 11,52,000/- (Eleven Lakh Fifty-Two Thousand
Only)

iii. The said calculation of refund amount (based on the analysis of bank statements) by the
amounts entities and other entities has been duly certified by M/s. MJM Patel & Co
Chartered Accountant ("Chartered Accountant") vide its Certificate dated July 17, 2019. In
the said certificate, the Chartered Accountant has inter alia stated that during the relevant
period, a total amount of Rs.741,03,012/- was received in my bank account and out of the
said amount only an amount of Rs. 11,52,000/- was towards “Subscription Amount” and
Rs. 7,29,51,012/- was towards Other Amounts. The copy of the Certificate dated July 17,
2019 along with Ledger Statements and supporting Bank Statements, is enclosed as
Annexure “F”.

iv. Pertinently, it may be noted that the said calculations regarding the refund of subscription
amount, were also set out in the Appeal (AppealNo.390of2018) and in response to the
same SEBI in its Affidavit in Reply had interalia stated that it has no comments to offer
regarding the same and defers to the judgment of the Hon’ble SAT. Thus, even SEBI has
not disputed the calculation of the refund amount i.e. Rs 11,25,000/-, received as fees
from the subscribers during the relevant period as duly certified by Chartered Accountant
vide its Certificate dated July 16, 2019.

In so far as my Income Tax Returns (which have been referred to in the SEBI Order) are
concerned following be noted :

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(i) “The term 'Investment Adviser Services as used in Income Tax Return is a
nomenclature given by the Chartered Accountant and the same is not decisive
cannot mean "Investment Adviser' in terms of SEBI Regulations.

(ii) I am involved in the business relating to philately and numismatics since last two
decades. I have a collection of rare stamps which are highly valuable and
meticulously collected from various Philatelists around the world. I am actively
involved in trading rare stamps and coins, paper currencies, medals, old and unique
post cards, rue original photos, autographs, historical evidence, maps, handwritten
religious books/articles and important newspapers covering historical events. There
exists active community world over in the trade of these items and I have earned
significant revenue from pursuing trade in these rare artefacts. I have an
incorporated company by the name of Alexander Stamps and Coin Limited to take
care of my business interests in philately and trading of rare artefacts. The Company
has a website name www.indianstampghar.com which seeks to promote digitization
and e-commerce the philately and numismatics area.

(iii) Further pursuing my interests in this area, I have also with a book titled- ‘Philately
A hobby, collection and investment” which is an introduction to investing in
postage stamps and talks about how philately apart from being hobby can also be
diversification of one’s investment profile. The book which mem experience of many
years in the collection and trade of stamps, was published and launched on 5 June
2016 and is also available on Amazon for purchase. The copy of the covering page
of the book is enclosed as Annexure “G”. I would also like to bring on record that
currently, I am in the process of opening a public museum to display my rare
collection of stamps, coins and other valuable artefacts.

(iv) I submit that the income from Investment Advisory services as shown in my Income
Tax Returns is inclusive of my profits and revenue from my business and trade in
stamps, coins, paper currencies and other artefacts as listed above. The general
nomenclature of 'Investment Advisory Services used by the Chartered Accountant is
inclusive of my revenue from my business in Philately, Numismatics and trade in
artefacts and is not used in the limited context of Investment Advisory Services as

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defined by SEBI and covers a wide array of business which is outside the ambit and
scope of SEBI's definition of Investment Advisory Services.

(v) Under the circumstances, I respectfully submit that in the SEBI Order, SEBI has
erroneously interpreted my Income Tax Returns to allege that as per the
"Computation of Total Income I was rendering Investment Adviser services and had
earned Rs. 2,15,63,800/- as net income from Investment Adviser Services during
financial year 2014-2015, Rs. 27,91,180 during financial year 2015-2016 and Rs.
13,43.349/- during financial year 2016-2017.
……………………………………………………………………………………..”

5. I have considered the Final Order and order dated July 29, 2021 passed by Hon’ble
SAT in Appeal no. 390 of 2018 and the submissions made by the Applicant in its
application dated November 22, 2021. I note that the scope of present proceedings
is limited to arriving at an amount which Applicant is liable to refund in the light of
observations made in the SAT order dated July 29, 2021 and the materials
submitted by the Applicant in its application.

6. I note that in the Final Order directions were issued against Mr. Anirudh Sethi for
acting as unregistered Investment Advisor and Research Analyst and collecting
subscription fees from his clients for providing such services. It is noted that while
passing the Final Order, the income tax returns of the Applicant were also
considered for the FY 2014-15, 2015-16 and 2016-17, which indicated that the
Applicant had earned a total amount of Rs. 25,698,329/- as net income from
‘Investment Advisory Services’ i.e. Rs. 2,15,63,800 during FY 2014-15, Rs.
27,91,180 during FY 2015-16 and Rs. 13,43,349 during FY 2016-17. Further, on
perusal of the bank account statements of the Applicant, it was found that there were
multiple transactions where amount equivalent to Rs. 36,000/- had been credited to
his bank account and as per the fees schedule posted on the website of the
Applicant, as on January 2, 2016, the Applicant was charging Rs. 25,000/- and Rs.
36,000/- for its various schemes. In relation to these credit transactions, during the

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proceedings before SEBI, the Applicant inter-alia submitted that he had taken the
amount of “Rs. 36000 from traders/Investors or participants who want Financial
Advice on Global Market (of every segment ) in general on various facets of internal
economic updation on commodity, currency market and security market etc. and we
are organizing Seminars on Technical Analysis and Trading Psychology … and
hence on account of the cost of holding the seminars, lecture meetings, interactive
deliberations and mutual consultations, the charges are collected for Seminars and
Books and Education Material we give to participant”. SEBI before passing the
directions against the Applicant for refund of subscription amounts to his clients
provided the Applicant an opportunity to submit a segregation of his earnings from
the ‘Investment Advisory Services’ and conduct of seminars/workshops. However,
the Applicant failed to provide any such segregation. Accordingly, while passing the
Final Order in the matter, all the funds credited in the bank account of the Applicant
i.e. an amount of Rs. 7,35,06,557/- in the account no. 624501031844 from October
22, 2013 to April 20, 2016, were directed to be refunded.

7. In his application dated November 22, 2021, the Applicant has firstly, submitted that
calculation of income from ‘Investment Advisory Services’ made in paragraph 37 of
Final Order is not correct because he was giving investment advice in non-traditional
items such as stamps, coins and artefacts etc. and his advisory services were not
limited to securities which are dealt in by IA Regulations and RA Regulations.

8. In this regard, I note that in paragraph 37 of the Final Order an amount of

25,698,329/- is shown as earnings from investment advisory services in the income
tax returns of the Applicant during FY 2014-15, 2015-16 and 2016-17. However, this
observation above was not the basis of giving directions of refunding Rs.
7,35,06,557/-which was on the basis of credits in the bank account of the Applicant.

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9. In order to demonstrate as to how much amount which was credited in his bank
account no. 624501031844 for the period October 22, 2013 to April 20, 2016 was
result of investment advisory fees and how much amount was the result of his other
activities, the Applicant has produced bank statements of account no.
624501031844 and a certificate issued by Chartered Accountant MJM Patel &
Company (FRN: 112246W), Address: 112, 1st Floor, Spentha Complex, Opposite
Vanijya Bhavan , Race Course, Vadodara – 390007 certifying as under:

“4. Based on our examination of the Bank Statement and Books of Account of Anirudh
Sethi we hereby certify that during the period under consideration total credit in the Bank
at No 624501031844 with ICICI Bank Ltd, Land Mark Building Branch, Vadodara, it of
834103,012/ which includes, apart from the amount received as fees of ies36.000/ Fan
the subscribers, the entries of Other Income / Other Receipts from various parties The
detailed breakup of the Subscription amount & Other Amount received during the period
from October 22, 2013 to April 20, 2016 is as follows:

Period Subscription Amount Other Amount (in Rs) Total

(n Rs)
22.10.13 to 31.3.14 9,72,000/- 1,66,04,695/- 1,75,76,695/-
1.4.14 to 31.3.15 72,000/- 4,19,52,946/- 4,20,24,946/-
1.4.15 to 20.4.16 1,08,000/- 1,43,93,371/- 1,45,01,371/-
Total 11,52,000/- 7,29,51,012/- 7,41,03,012/-

5. The particulars of source of "Other Amounts" (for the period 22.10.2013 to

11.03.2014 41.6604,695/, for the period 01 04.2014 to 31.03.2015 Rs.4,19,52 546/-
for the period 01.04.2015 to 20.04.2016 Rs. 1,43,93,371/-) credited in the Bank
Account of Mr. Anirudh Sethi are set out in detail in the enclosed Annexure, it is
certified that none of the amounts forming part of "Other Amounts" pertains to
subscription amount.”

10. I note that the same certificate was also annexed by the Applicant as an Annexure to
his Appeal No. 390 of 2018 filed before Hon’ble SAT. Hon’ble SAT also took note of
the said certificate issued by the Chartered Accountant and considering inter-alia the

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said certificate vide its order dated July 29, 2021, Hon’ble SAT partly modified the
Final Order & remitted the matter to SEBI for fresh determination of refund amount.
While remitting back the matter to SEBI, Hon’ble SAT observed that it would not be
practical to trace the subscribers/ clients of the Applicant to refund the amount to
them.

11. As mentioned above, certificate issued by Chartered Accountant states that amount
of Rs.11,52,000/- was the ‘subscription amount’ and Rs.7,29,51,012/- is Other
income/ Other Receipts from various parties. Therefore, on the basis of this
certificate, the liability of the Applicant is Rs. 11,52,000/-.

12. As per the directions of Hon’be SAT, the Applicant was directed to deposit an amount
of Rs.12 lakhs in the Investor Protection and Education Fund established by SEBI
and Rs. 20 Lakhs with an interest bearing account. Hon’ble SAT further directed that
these amounts shall be adjusted towards further appropriation of the amount, if any,
to be arrived at by SEBI and any excess amount shall be refunded.

13. I note that in line with the directions of Hon’ble SAT, the Applicant has already
complied with the direction of depositing 12 lakhs and 20 lakhs with the Investor
Protection and Education Fund and an interest bearing account, respectively. Further,
in view of the fact that the Applicant has deposited Rs. 12 lakhs on August 20, 2021
and Rs. 20 Lakhs on September 14, 2021, as directed in the order of Hon’ble SAT
and in view of the submissions of the Applicant and the certificate issued by Chartered
Accountant brought on record, I find that the exact figure of the ‘subscription amount’
collected by the Applicant during October 22, 2013 to April 20, 2016 is Rs.11,52,000/.
I also note that the said “subscription amount” collected by the Applicant during
October 22, 2013 to April 20, 2016 i.e. Rs. 11,52,000/- is less than the amount of
Rs 32,00,000/- deposited by the Applicant. In view of the same, I dispose of the

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Application made by the Applicant, and direct that the excess amount of
Rs. 20,48,000/- be refunded to the Applicant.

14. This order does not preclude the clients/investors to pursue the other legal remedies
available to them under any other law, against the Applicant for refund of money or
deficiency in service before any appropriate forum of competent jurisdiction.

15. This order shall come into force with immediate effect.

Place: Mumbai ANANTA BARUA

Date: December 07, 2021 WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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