SEBI Censures Investment Adviser, Says Firm Cannot Escape Liability For Employee Misconduct

The Securities and Exchange Board of India (SEBI) has recently censured investment advisory firm Winway Research for multiple regulatory violations, holding that the firm failed to act as a fiduciary and could not escape responsibility for misconduct by its own employee.

The order was passed by SEBI Whole Time Member Amarjeet Singh.

In the order, the regulator made it clear that an adviser cannot distance itself from wrongdoing that occurs during the course of employment.

“An employee of the Noticee engaged into unlawful activities, during the course of his employment with the Noticee; and the Noticee, as an employer, failed to protect his clients from his own employee,” the SEBI member observed, rejecting the firm's attempt to shift blame.

Winway Research is a proprietorship concern run by Ankur Jain and registered with SEBI as an investment adviser. The case began after SEBI received complaints on its SCORES platform.

The complaints pointed to clients being charged for the same advisory product over overlapping periods. They also raised concerns about fees being routed to personal bank accounts instead of the firm's account. The complaints further referred to missing call recordings and delays in addressing investor grievances.

SEBI examined the complaints and appointed a designated authority to conduct an inquiry.

In response, Jain denied the allegations. On overlapping fees, he said the issue arose due to a lack of understanding of the invoicing system before changes were made in 2020.

On fees being routed through an employee's bank account, he argued that former employees had misused the firm's credentials without his knowledge and that he could not be held responsible for their independent actions.

He also cited technical failures for the loss of call recordings and said reasonable steps had been taken to resolve investor complaints, with delays being unintentional.

SEBI rejected these explanations. On overlapping fees, the regulator said selling the same product for overlapping periods breached the adviser's fiduciary duty to clients.

“In the present case, the Noticee, by selling the same product for an overlapping period, has failed to uphold the values of the fiduciary relationship between the Noticee and his clients,” Singh said.

On employee misconduct, SEBI held that employer responsibility could not be diluted merely by claiming misuse of credentials. The order noted that the adviser had a duty to ensure clients were protected from such conduct.

On call records, SEBI said maintaining recordings was a mandatory requirement and technical failures were not a valid excuse. On investor complaints, SEBI found that Jain had not explained what steps were actually taken to resolve the pending grievances.

Taken together, SEBI said the violations warranted a regulatory censure. The order clarifies that while no monetary penalty or suspension was imposed, the lapses were serious enough to justify a formal censure that will remain on the adviser's regulatory record.