Stark Investments and Others Receive SEBI Cease-and-Desist Order After Mobilizing Over ₹25 Crore Unregistered

Stark Investments and Others Receive SEBI Cease-and-Desist Order After Mobilizing Over ₹25 Crore Unregistered​

Securities and Exchange Board of India (SEBI) has issued a strict Ex Parte Interim Order against multiple entities, including Surabhi Chauhan, Zahin Ismail Jessani, Stark Investments, and Starkblue Ventures LLP. The order comes after the SEBI found that these entities engaged in both Unregistered Investment Advisory (UIA) and Unregistered Portfolio Management Services (PMS), exposing investors to significant risk.

The interim directive mandates an immediate halt to all dealings in securities for the implicated parties, preventing them from continuing their unauthorized advisory activities across different financial markets. The investigation concluded that the Entities mobilized a substantial amount of ₹25,08,18,608.15 through these dual unregistered services.

Allegations of Unregistered Advisory and PMS Services​

The SEBI examination revealed a calculated and sophisticated modus operandi used by the entities to solicit investment funds. Surabhi Chauhan and Zahin Jessani, operating through Stark Investments, executed mandate agreements with clients, claiming that Stark Investments would act as their financial advisor. These contracts outlined tasks such as performing investment planning, creating optimal asset allocation strategies, and advising on various investment opportunities.

Beyond formal agreements, the market exposure was heavily driven by digital communication. The SEBI found evidence of specific investment recommendations provided to investors through WhatsApp chats. These communications detailed buy/sell instructions, including target prices and quantities for securities like GMR Infra and Ahlada Engineers.

The operations were further extended via Starkblue Ventures LLP. This entity, incorporated in February 2022, was marketed as a limited liability partnership offering the 'SQAR' (Stark Quantitative Absolute Return) Strategy. Investors were induced to become partners in the LLP, pledging funds into a common corpus managed under this strategic framework.

Misleading Marketing and Professional Claims​

The Entities extensively promoted their services using high-octane language and sophisticated terminology to create an illusion of legitimacy. Promotional materials claimed that Stark Investments possessed superior skills and was driven by a proprietary quant investing model. They highlighted features such as multi-asset allocation, active risk management processes, and the use of in-house developed algorithms.

The marketing documents featured detailed performance snapshots and success stories spanning over five years. These claims included highlighting individual stock picks and various portfolio returns compared to benchmarks like Nifty 50, generating a false impression of assured financial success. The clients were consistently shown that they were participating in an exclusive partnership designed for high returns with low volatility.

Regulatory Violations Established by SEBI​

The preliminary findings established clear violations against the Entities concerning both Investment Advisory and Portfolio Management regulations. By entering into mandate agreements, the entities presented themselves as professional investment advisors. These agreements granted Stark Investments discretionary authority over the clients' accounts, including the power to direct, manage, and change investments without requiring specific client consent.

The PMS activities were found to be equally unregulated. The Entities promised profit-sharing managed account models based on performance, using proprietary strategies. Despite possessing operational control over the funds, neither Ms. Surabhi Chauhan, Mr. Zahin Jessani, nor Stark Investments had obtained the mandatory registration from SEBI as required under the IA and PMS regulations.

Immediate Operational Constraints Imposed by SEBI​

In light of these violations, SEBI has imposed severe interim directions against all involved entities (Nos. 1 to 5). The primary direction immediately restrains them from buying, selling or dealing in securities or associating themselves with the securities market, either directly or indirectly. This action is mandated until further orders are issued by the Board.

Furthermore, Banks and Depositories have been specifically directed to ensure no debits are made against the joint or individual accounts held by the Entities without prior permission from SEBI. Credits, however, may be allowed into these accounts. The restriction of assets extends to prohibiting any transfer or redemption of securities held by the Entities without SEBI's consent.

Financial Scope and Accountability​

The investigation meticulously accounted for funds collected across different corporate and personal accounts used by the involved parties. Stark Investments (a partnership firm) accounted for ₹6,22,56,908.95 from one Axis Bank account. Zahin Jessani’s personal accounts contributed ₹1,29,74,143.77, while Surabhi Chauhan's personal accounts totaled a combined ₹1,49,65,708.27.

The dedicated LLP account of Starkblue Ventures LLP was credited with ₹15,86,31,860.34 from investors—representing the funds mobilized under the SQAR strategy. The aggregated total amount mobilized through these unregistered activities stood at ₹25,08,18,608.15, placing immense scrutiny on the entities’ operational integrity.