SEBI has barred Lee Capital Services and its managing director from the securities market for running an unauthorised money pooling scheme by promising “unrealistic returns” and directed the firm to make refunds, along with interest, to investors within three months.

The Securities and Exchange Board of India, in its order on Thursday, said action has been initiated against Lee Capital which was found to have collected Rs. 300 crore from the pubic by “blatantly misusing the SEBI registration granted to act as a stock broker or sub-broker”.

Continuing its crackdown on fraudulent investment schemes, SEBI has also asked Lee Capital to wind up its money raising activities.

Apart from Lee Capital, the market regulator has also barred its managing director Santhosh Kumar and his father K.L. Kunjiraman Pillai from dealing in the securities market till further directions.

Lee Capital had also misused its stock broker registration with SEBI. It was further revealed that Lee Capital had launched various schemes wherein it used to solicit funds from various investors by making false promises of “unrealistic returns” without making any genuine investments.

The company was found to be paying profit share to the existing investors from funds collected from new investors. SEBI also observed that the schemes floated by Lee Capital envisaged profit sharing, ranging from 36 per cent to 60 per cent per annum, to the investors.

“Lee Capital made false representations to investors by misusing SEBI stock broker and sub-broker registration numbers and entering into agreements with the investors as a portfolio manager without having any valid registration certificate issued by SEBI,” the regulator said.

Besides, Lee Capital acted in a fraudulent and deceitful manner, violating PFUTP (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) regulations as well as stock broker norms.

SEBI has directed “Lee Capital to close, terminate and wind up all its schemes and to refund the monies collected from the investors in its schemes along with income, profits or returns promised to them under its schemes or interest at the rate of 10 per cent per annum, whichever is higher”.

The refund should be made within three months from December 19. Further, SEBI has directed Lee Capital, Santhosh Kumar and his father to “cease and desist from unauthorised activities and not to solicit or undertake such activities or any other unregistered activity in the securities market, directly or indirectly, in any manner whatsoever”.

These entities have also been directed to immediately withdraw all advertisements in relation to the schemes.

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