SAT Modifies Sebi Order Against Avadhut Sathe Trading Academy, Directs ₹100 Crore Deposit
The Securities Appellate Tribunal (SAT) delivered a significant ruling on Thursday, partially scaling back the market regulator's stringent order against Avadhut Sathe and his trading academy while permitting the ongoing investigation to proceed. The tribunal directed the Avadhut Sathe Trading Academy (ASTA) to deposit ₹100 crore into a fixed account, a substantial reduction from the ₹546 crore initially demanded by the Securities and Exchange Board of India (Sebi) in its December order.
Prima Facie Case Established Against ASTA
A bench comprising presiding officer Justice P.S. Dinesh Kumar and technical member Meera Swarup held that Sebi had successfully established a prima facie case indicating potential violations of the regulator's Investment Advisers and Research Analysts regulations by ASTA and its promoters. However, the tribunal opted for a more measured approach by imposing a lower deposit requirement alongside restrictions on the alienation of assets, rather than enforcing the full financial demand at this interim stage.
Background of the Regulatory Dispute
ASTA, which has been conducting stock market training programs since 2008, had challenged an ex-parte interim order-cum-show cause notice issued by Sebi on December 4 last year. The regulator alleged that under the guise of investor education, Sathe and his academy were providing unregistered investment advisory and research analyst services. These activities reportedly involved using live market data, offering specific stock recommendations, setting targets and stop-losses, and collecting over ₹601 crore from more than 3.37 lakh participants.
Sebi further contended that the academy misrepresented profits or losses made by its students through content uploaded on YouTube. In response, the regulator had directed ASTA to deposit ₹546 crore—the alleged illegal gain—into a fixed deposit with a lien in favor of Sebi.
Arguments Presented Before the Tribunal
During the proceedings, ASTA argued that its courses were purely educational in nature and that Sebi had acted in violation of constitutional rights by issuing an urgent order without first hearing its side. The academy also claimed that complying with the deposit directive was impossible since its bank accounts had been frozen and the appellants had been barred from participating in the stock market.
Sebi countered these arguments by presenting evidence seized during the investigation, including videos, WhatsApp messages, and testimonials. The regulator asserted that this material demonstrated specific stock recommendations were being given and acted upon, even after an administrative warning was issued in March 2024.
Tribunal's Observations and Interim Measures
The tribunal refrained from recording any final findings on the factual allegations, noting that ASTA had chosen not to argue the merits at this stage as it had yet to file its reply to the show cause notice. Nevertheless, the bench observed several concerning elements: testimonials claiming large trading profits were uploaded on YouTube even after Sebi's warning, live market data was demonstrated in classes, and paid WhatsApp groups existed where stock recommendations were shared. These factors, the tribunal stated, were sufficient to establish a prima facie case warranting regulatory intervention.
Regarding the monetary restraint, SAT took note of ASTA's submission that approximately ₹166 crore of the disputed amount was lying in government treasury and that the academy owned fixed assets worth about ₹100 crore. Consequently, the bench directed ASTA to deposit ₹100 crore and restrained it from alienating its fixed assets, instead of insisting on securing the full ₹546 crore at this interim juncture.
Partial Allowing of Appeal and Future Proceedings
The appeal was thus allowed in part. ASTA has been directed to disclose full details of its assets along with valuation certificates and to file its reply to Sebi within four weeks. The tribunal clarified that its observations were limited to deciding the appeal against the interim order and that Sebi would independently pass its final order after considering the academy's response.
This ruling highlights the ongoing tension between regulatory oversight and educational entities in India's financial markets, setting a precedent for how such cases may be handled during interim stages while investigations continue.
