SEBI fines Paisabazaar's subsidiary on regulatory violation

Paisabazaar Marketing appointment: Paisabazaar Marketing and Consulting, a subsidiary of PB Fintech, has been fined Rs 1 Lakh by the Securities and Exchange Board of India (SEBI) for the appointment of a principal officer lacking the required certification.

Naveen Kukreja, the co-founder and CEO of Paisabazaar.com, served as the principal officer of Paisabazaar Marketing and Consulting and was found to be in breach of regulatory requirements.

The violation was attributed to Kukreja not possessing the National Institute of Securities Markets (NISM) level 2 series XB certification as of June 30, 2023, as mandated by Regulation 7(2) of IA regulations, according to SEBI's order.

Kukreja holds the position of co-founder and CEO of PB Fintech's lending vertical, Paisabazaar.com.

Regulations stipulate that individual investment advisers or principal officers of non-individual investment advisers, registered under these regulations, and individuals associated with investment advice, must hold certification in financial planning, fund management, asset management, portfolio management, or investment advisory services, either from NISM or other recognized institutions, including the Financial Planning Standards Board of India.

The adjudicating officer, Soma Majumder, noted the nature and gravity of the violations and the mitigating factors and imposed a minimum penalty of Rs 1 Lakh on Paisabazaar Marketing & Consulting Pvt Ltd in the order. If the company fails to remit the fine within 45 days of receiving the order, the market regulator may initiate further actions, as per the order. 

Background

The matter dates back to over a year ago when BSE Administration and Supervision Ltd (BASL) conducted an inspection of Paisabazaar from April 21, 2021, to August 31, 2022, in November of the previous year.

Following the inspection, Paisabazaar received findings and responded. However, upon reviewing the findings and the company's response, it was found that Kukreja was in violation of the regulations.

In response to a show cause notice, Paisabazaar cited difficulties in ensuring compliance due to COVID-19 pandemic restrictions. The company claimed that Kukreja obtained the necessary certification by September 13 of the current year and was in full compliance with regulations.

Taking all factors into consideration, the market regulator found Kukreja to be in violation of compliance requirements and imposed a fine. It is worth noting that Paisabazaar has demonstrated impressive growth over the last three reported quarters. In Q3 FY23, the business achieved break-even on an adjusted EBITDA level. In Q1 FY24, Paisabazaar recorded a 53 per cent year-on-year (YoY) increase in loan disbursals and a 47 per cent YoY rise in credit card issuance.