SEBI Questions Whether MMFF Was an Unauthorised PMS Scheme

The biggest issue raised by SEBI was whether the MMFF programme was effectively being run like an unauthorised portfolio management services or PMS scheme. According to the regulator, investor agreements promised fixed returns and 100% capital protection. SEBI said it found no evidence that the money was actually invested in the securities market. Bank records showed around ₹72.66 crore in credit entries and ₹72.41 crore in debit entries in one ICICI Bank account during the period examined. The regulator also pointed to transactions carrying descriptions such as “PMS”, “Dividend” and “Referral”. SEBI said the repeated referral payments suggested a structure resembling a multi level marketing model used to attract more investors.

Money Transfers Between Shares Bazaar and KPPL Under Scrutiny

SEBI also examined the movement of money between Shares Bazaar and Kisaan Parivar Pvt Ltd or KPPL, a group entity linked to director Bhupal Nanavath. The regulator found that around ₹13.81 crore moved from Shares Bazaar to KPPL, while about ₹3.35 crore moved in the opposite direction. SEBI said investor funds were allegedly used for payments to earlier investors as well as dividends and referral amounts. Shares Bazaar argued that the MMFF programme had been created by former CEO Tirumala Lakshmi Venkata Ramesh without board approval and that the money was raised through privately placed compulsorily convertible debentures. The company also said PMS related material stayed on its website because it had accidentally remained on a live server.

SEBI Rejects Shares Bazaar's Explanations

SEBI did not accept those explanations. The regulator said the documents produced by the noticees were not sufficient to support the claims and some of the material fell outside the period under examination. SEBI also noted that PMS related content remained available even after an advisory issued in March 2022. The regulator held that Shares Bazaar had gone beyond the limits of its research analyst registration and violated provisions of the SEBI Research Analysts Regulations, 2014 and the SEBI Intermediaries Regulations, 2008. The directors and senior management were also held responsible for their respective roles. SEBI said the exact amount of unfair gain could not be calculated because the funds were mixed and moved between entities.

Who Has to Pay the ₹20 Lakh Penalty?

So who has to pay the ₹20 lakh SEBI penalty? Shares Bazaar has been fined ₹10 lakh. Director Bhupal Nanavath, director Prasanna Lakshmi Atluri and former CEO Tirumala Lakshmi Venkata Ramesh have each been fined ₹3 lakh. Current CEO Mitta Naresh has been fined ₹1 lakh. SEBI also considered earlier regulatory action against Shares Bazaar, including restrictions involving Shares Bazaar AIF in February 2024 and cancellation of its stockbroker registration in July 2024. The case puts renewed attention on assured return schemes that promise unusually high gains while presenting themselves as market linked investments. For investors, the key question remains simple: when a scheme promises 48% returns, what exactly is backing that promise?