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SAT once again upholds the powers of SEBI to seek refund of fees collected by an unregistered investment adviser

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The Securities Appellate Tribunal in a recent order discussed the the powers of SEBI to pass orders directing refund of monies collected as fees by an unregistered investment adviser.

The Appellant contended that there was no power under the SEBI Act or under the Investment Advisers Regulations to refund the amount collected as fee for the services rendered by the appellant and its partnership firm and therefore direction to refund the amount was wholly illegal. It was contended that Regulation 35 of the SEBI Intermediaries Regulations requires refunding any money collected from the securities under any โ€œscheme or otherwiseโ€.

In this context, Securities Appellate Tribunal held that the direction to refund the amount by SEBI under Section 11 of the SEBI Act is within the powers of SEBI and in the interest of the investors or to promote development of the securities market.

The Securities Appellate Tribunal further held that “The word “schemeโ€Ÿ is wide enough to include a device which the appellant have carried out in the form of giving advisory services without obtaining registration.”

The Appellant contented that refund amount ought to be apportioned as the Appellant had resigned from the firm and at best, can only be entitled to refund the amount till the date when he was a partner in the firm. The Securities Appellate Tribunal dismissed appeal as there was no clear evidence submitted by the Appellant to show that the partnership had validly dissolved.

A copy of the SAT Order is attached below.

Readers are welcome to send their views to Regstreet Law Advisors on info@regstreetlaw.com

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