SEBI Imposes ₹5 Lakh Penalty on IA Over Compliance Lapses and Record Failures

SEBI Imposes ₹5 Lakh Penalty on IA Over Compliance Lapses and Record Failures​

SEBI has issued a significant adjudication order, penalizing a prominent investment adviser for multiple lapses in maintaining statutory records and continuous professional certifications. The order highlights the strict regulatory oversight governing the financial services sector.

SEBI Hits Investment Adviser with ₹5 Lakh Penalty for Compliance Breaches​

The Securities and Exchange Board of India (SEBI) released an Adjudication Order on May 27, 2026, concerning Rajiv Sharma, Proprietor of M/s. Capital Life Market Research. Sharma, who operates as an investment adviser (IA) registered with SEBI, was charged with violating several provisions of the Investment Advisers Regulations, 2013.

The findings stemmed from a thematic inspection conducted over an inspection period starting from April 01, 2023, to January 31, 2025. The inspection assessed key areas, including fee charges, NISM qualification compliance, and the submission of required reports.

The final order determined that the noticese committed violations related to operational compliance, leading the Adjudicating Officer to impose a monetary penalty of ₹ 5,00,000/- (Rupees Five Lakh Only) under Section 15EB of the SEBI Act.

Violations Cited: Record Keeping and Regulatory Non-Compliance​

The adjudication order detailed multiple areas of non-compliance. The violations were categorized into three main themes: failure to maintain an arms-length relationship, lapsed NISM certifications, and deficiencies in record keeping.

SEBI noted that the noticee failed to update KYC details for five clients on the CVL-KRA portal and did not submit mandatory annual compliance audit reports for FY 2023-2024, nor periodic reports for the half-years ending March 2024 and September 2024.

A key regulatory breach identified was the failure to maintain comprehensive client records and adequate documentation. These records, crucial for assessing suitability and client history, were allegedly stored on an external hard disk that became non-functional.

Furthermore, the board established that the noticee violated regulations 15(8), 15(12), and 19(1)(a to h) of the IA Regulations. The order emphasizes that the failure to maintain records is an unconditional obligation for registered intermediaries.

Failure to Maintain Continuous Professional Certification​

The Adjudicating Officer also addressed the issue of professional certifications. It was noted that the noticee’s requisite NISM certifications (Level 1 and Level 2) had expired in April 2024 and April 2024, respectively.

Despite the lapse, the order found that the noticee continued to collect investment advisory fees, amounting to a total of ₹ 1.20 Crore during FY 24-25. The SEBI ruling concluded that the continuous compliance requirement for NISM certifications could not be retroactively cured by subsequent attempts at renewal.

Regarding the 'arms-length' relationship, the order found the noticee in violation of Regulation 15(3). While the noticee argued that transactions involved were personal borrowings, the adjudication determined that the co-mingling of funds, even in a sole proprietorship account, constituted an operational risk that failed to meet the regulatory standards.

Penalty Imposition Despite Mitigating Efforts​

While the noticee presented arguments emphasizing personal constraints and the lack of investor loss, the SEBI order maintained its determination of guilt.

The noticee attempted to mitigate the penalty by citing instances where regulatory action was taken leniently, pointing to prior rulings regarding technical and inadvertent lapses.

However, the Adjudicating Officer held that once the contravention of statutory obligation is established, the penalty is attracted, irrespective of whether guilty intention is proven. The SEBI order reaffirmed that the statutory requirement to maintain records and certifications cannot be absolved by hardware failures or personal hardships.

Ultimately, the order concluded that the penalty of ₹ 5,00,000/- was commensurate with the cumulative regulatory lapses and statutory non-compliance. The noticee is required to remit the penalty amount within 45 days of receipt of the order.