Regulator Cracks Down on Investment Advisor Over Client Fund Misuse

The Securities and Exchange Board of India (SEBI) has taken strong action against a registered investment advisor for serious misconduct. The regulator has reprimanded Ankur Jain, proprietor of Winway Research, for multiple violations that put client money and trust at risk. This case highlights the critical rules advisors must follow and the consequences of breaking them.

Serious Breaches in Client Fund Handling

The most serious finding by SEBI was the routing of client funds through an employee’s personal bank account. Investment advisors are strictly required to collect fees and payments only through direct, transparent channels in their own firm’s name. Routing money through an employee’s account creates a severe risk of misuse, complicates record-keeping, and blurs the line between client and personal funds. SEBI found this practice unacceptable.

Winway Research also engaged in charging overlapping fees from clients. This means clients were potentially billed twice for the same service or charged under unclear categories. SEBI’s rules demand complete transparency in all fee structures so investors know exactly what they are paying for.

Systemic Failures in Operations and Grievance Redressal

The regulatory failures extended beyond money matters. SEBI found that the advisor failed to maintain recorded conversations with clients for a five-year period as required. These records are crucial for resolving disputes and ensuring advice given is appropriate. Furthermore, the advisor did not resolve complaints lodged on SEBI’s SCORES platform, which is the official central system for investor grievance redressal.

When confronted with these charges, Ankur Jain provided explanations to SEBI. He argued that the employee account was used for operational ease and that client money was not misused. However, SEBI firmly rejected these defenses. The regulator stated that the violation of rules was clear and that the explanations did not justify the breaches or reduce their seriousness.

A Warning to the Advisory Industry

This action serves as a clear warning to all SEBI-registered investment advisors. The regulator is closely monitoring compliance with rules designed to protect investors. Key areas of focus include the sanctity of client funds, transparent fee charging, proper record maintenance, and timely grievance resolution.

For general investors, this case underscores the importance of using only SEBI-registered advisors. It also reminds investors to always make payments directly to the advisory firm’s official bank account, not to any individual. Investors should clearly understand all fees and promptly report any issues through the official SCORES platform if an advisor is unresponsive.

SEBI’s decision reinforces its commitment to cleaning up the advisory landscape and ensuring that registered entities operate with the highest standards of integrity and client care. The reprimand against Winway Research is a signal that regulatory shortcuts and poor compliance will not be tolerated.