The Securities and Exchange Board of India (SEBI) barred Bengaluru-based investment advisors Minance Investment Advisor Pvt Ltd (MIAPL) from operating, as well as instructed that its current and former directors don’t undertake any activity in the securities market.

Minance, Anurag and the other two directors —  Sarbashish Basu and Pankaj Mahanty — have been barred by SEBI for not complying with investment advisor norms.

Minance’s co-founder and director Anurag Bhatia rose to prominence promising investors great returns, and in a two-part series on ET Prime, the company’s actions were outlined, which were described as “a tale of mis-selling, default on payments and related party transactions”.

Between 2015 to 2019, Anurag floated around 5 companies, Minance Investment Advisor, Minance Technologies, Minance Research, Minance Analytics, and others, which were involved in investment advisory, High-frequency Trading, dealing in derivatives, investing in unlisted shares, among others. In almost every case, he lured investors promising them great returns. He also claimed that he had tied up with Angel Broking and IIFL as broking partners. However, Angel Broking denied ever having partnered with Anurag or Minance.

At least 5 FIRs have been filed against Minance and Anurag for alleged criminal breach of trust, cheating and misrepresentation under the Indian Penal Code as well as offences under The Information Technology Act, 2000. There are also at least six cases as part of Section 138 of The Negotiable Instruments Act, 1881 (Dishonour of cheque for insufficiency, etc., of funds in the account), according to the SEBI order.

Sebi has also barred MIAPL, Anurag and its two former directors from the capital markets. The order states that complaints are flowing in in scores, and that MIAPL collected ~Rs 2.90 crore, which it said “indicates the magnitude of the prospective threat to the investors.”

The four parties have also been ordered to “cease and desist from undertaking any activity in the securities market including the activity of acting and representing through the media as an investment advisor".

SEBI carried out a preliminary examination of the company after it received several complaints. The preliminary examination showed prima facie that Minance didn’t disclose to the markets regulator about a change in address and the change of composition of its board of directors. Two of the company's directors resigned. While the first resignation should have been intimated and replaced. Later, when the second director also resigned and Minance functioned with one director, the order states, thereby not complying with the Companies Act which requires private companies to have at least two directors.

Furthermore, it did not have a compliance officer and did not meet capital adequacy requirements for investment advisors. As per the rules, investment advisors are supposed to have a net worth of more than Rs 25 lakh. Letters addressed to Minance and Anurag went unaddressed, the order states, which means that the company has failed to furnish information sought by the markets regulator.

“As per bank statements taken from banks, the balance in bank accounts of MIAPL as on September 8, 2020 is nil,” the interim order states.

“...the activities and manner of operation of MIAPL, has cast a shadow of doubt on its financial solvency and efficient running of its operations. Thus, I am of the prima facie view that by allowing MIAPL to continue to act as an IA, will be a serious threat to the integrity of the market as well as it will be harmful to the interest of the investors,” the interim order adds.

Availing Minance’s service is detrimental to investors as the company neither has the compliance officer nor has the board strength to effectively function as a company, it added.

“This coupled with the prima facie finding that MIAPL's net worth is not at the desired level along with its promoter – director, Anurag Bhatia's prima facie failure to honour the cheques, indicates that services offered by MIAPL, will not be in the best interest of its clients,” Sebi further added.

SEBI noted that if an ex-parte order is not passed, “many prospective investors may have to part with fees and investment resulting into irreparable injury to themselves as the advice given by MIAPL may not be in their best interest”.

MIAPL cannot divert funds, sell assets, remove money from the bank without informing SEBI and has to withdraw and remove all advertisements about its investment advisory activity. Banks where Minance has accounts have been directed to not allow debits or credits without SEBI approval.

The directions will be in force until further orders.

Anurag was earlier reportedly arrested by the Jaipur police officials for promising to sell 500 shares of Paytm to a businessman at a cost of Rs 18,500 per share, but ended up keeping the amount and did not deliver the shares, thereby allegedly defrauding the businessman of Rs 92 lakh.