SEBI Penalises Investment Adviser ₹5 Lakh For Operating Without Valid NISM Certification, Other Lapses

The Securities and Exchange Board of India (SEBI) has imposed a ₹5 lakh penalty on Rajiv Sharma, proprietor of Capital Life Market Research, for continuing to provide investment advisory services without valid mandatory NISM certifications and for multiple compliance lapses relating to record maintenance, KYC updates, and reporting requirements.

The order was passed by SEBI Adjudicating Officer Jai Sebastian.

“The Noticee, being an IA, was duty-bound to remain fully compliant with all applicable regulatory provisions. The plea that the lapse occurred due to compelling personal and financial constraints, that no unsuitable advice was rendered and that no clients' complaints arose or no loss has been caused to clients cannot absolve the Noticee of his statutory responsibility,” Sebastian said.

The proceedings arose from a thematic inspection covering the period from April 2023 to January 2025. The inspection examined compliance relating to advisory fees, NISM certifications, record maintenance and grievance redressal.

SEBI alleged that Sharma continued rendering investment advisory services after expiry of his mandatory NISM certifications. It also alleged that he failed to maintain prescribed client records, did not update KYC details of certain clients and failed to submit required regulatory reports.

Sharma denied the allegations. He attributed the lapses to failure of an external hard drive containing client data, technical issues with the KRA platform and temporary misplacement of physical records during office relocation. He also argued that no investor had suffered any loss or lodged any complaint.

SEBI, however, held that these explanations did not absolve him of his regulatory obligations.

The regulator had also alleged that Sharma failed to maintain an arm's-length relationship between his advisory business and personal financial dealings by receiving loans from certain clients through the same bank account used for advisory services.

Sharma contended that the amounts identified were personal loans from friends, relatives and persons known to him, unrelated to advisory services.

Accepting this explanation, SEBI dropped that charge.

“Without clear proof that this financial arrangement led to biased investment advice, unfair fees or a direct conflict of interest that harmed the clients, the co-mingling of funds in a proprietorship account is an operational overlap rather than a regulatory breach,” the officer said.