SEBI fines research analyst Rs 6 lakh over outsourcing and KYC lapses

The Enforcement Action

The Securities and Exchange Board of India (SEBI) has imposed a monetary penalty of Rs 6,00,000 (six lakh rupees) on Rishabh Tanwar, a SEBI-registered research analyst (registration number INH100009293), for failures linked to an outsourcing arrangement with a third-party service provider. The penalty was imposed by Adjudicating Officer Medha Sonparote in Adjudication Order No. Order/MS/SM/2026-27/32789, dated 22 October 2026, passed under Section 15-I of the SEBI Act, 1992 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995.

According to the order, the matter began with an inter-governmental reference to SEBI which alleged that a person associated with the research analyst was running a share trading call centre, possibly in breach of the research analyst rules. SEBI then inspected the research analyst's operations for the period 1 April 2023 to 31 October 2024.

The adjudicating officer held that six violations were established, covering outsourcing without a binding contract, the absence of an outsourcing policy, inadequate due diligence on the third party, the loss of KYC records, the outsourcing of core functions such as KYC and client grievances, and the failure to publish monthly complaint data. The penalty was levied under Section 15EB of the SEBI Act.

The order records that the research analyst admitted all six lapses, did not contest the allegations, and made submissions only on the quantum of penalty. A corrigendum issued the same day corrects a typographical error in the first paragraph of the order, where the noticee's name had been printed incorrectly.

How the Scheme Worked

The order describes a single commercial arrangement with one service provider, lasting roughly six months. Under it, the service provider on-boarded clients for the research analyst's paid services. The agreement on file stated a term from 21 December 2023 to 26 June 2024. However, SEBI found that the service provider first approached the research analyst by email only on 27 December 2023, after the stated start date, which the order treats as evidence that adequate due diligence had not been carried out.

SEBI also found that services began before any legally binding contract existed. Per the order, the final draft of the agreement was shared by a legal adviser on 8 June 2024, sent to the service provider for signing on 27 June 2024, and notarised by both parties on 6 July 2024. The order notes this was after a visit by the FIU Crime Branch, Mumbai on 15 June 2024. The adjudicating officer held that "subsequent execution of an agreement does not automatically establish" compliance for the earlier period.

The money flows set out in the order are significant. Clients on-boarded through the arrangement paid an aggregate of Rs 1,09,86,597. Of this, Rs 98,29,709, roughly 90 per cent, was transferred to the service provider and its team, above the 88 per cent commission stipulated in the agreement. According to the research analyst's own reconciliation recorded in the order, his net retention after costs was Rs 10,91,889, or about 9.9 per cent of receipts.

The agreement's clauses 4.5 and 4.6 entrusted KYC and client grievance handling to the service provider. When SEBI's inspection team asked for records, KYC documents, including PAN and Aadhaar copies, could not be produced for 471 of 509 clients. The order records that the data had been deleted and no backup existed. Separately, monthly complaint status had not been displayed on the research analyst's website by the seventh of each month.

Procedurally, SEBI communicated its inspection findings on 17 June 2025 and received a reply on 22 June 2025. An adjudicating officer was appointed on 10 July 2026, and a show cause notice dated 4 September 2026 followed. He replied on 19 September 2026, made further submissions on 23 September and appeared in person for a hearing.

In weighing the penalty, the adjudicating officer observed that the activity was "akin to lending his license to another unregistered entity for a fee". The order also states that the service provider's own activities were not part of the proceedings before that office.

The Law Invoked

The order holds that the research analyst breached Regulations 13(i) and 24(2) of the SEBI (Research Analysts) Regulations, 2014, read with Clauses 1, 2 and 7 of the Code of Conduct in the Third Schedule. Regulation 13(i) makes registration conditional on abiding by the SEBI Act and the regulations. Regulation 24(2) requires research analysts to follow the Code of Conduct, whose clauses cover honesty and good faith, diligence, and compliance with all applicable regulatory requirements. For the outsourcing of core functions, the order also cites Clause 8 of the Code.

The order further cites SEBI Master Circular No. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2024/49 dated 21 May 2024. Clause 5.3 requires research analysts to disclose all complaints, including SCORES complaints, monthly by the seventh of the following month. Clause 10.5 bars intermediaries from outsourcing core business activities and compliance functions. Paras 1, 2, 4, 5 and 6 of Annexure E, read with Clause 10.4, require respectively an outsourcing policy, an outsourcing risk management programme, due diligence on the third party, a written binding contract, and contingency and disaster recovery plans.

The penalty itself was imposed under Section 15EB of the SEBI Act, which provides for a penalty of not less than one lakh rupees, extendable up to one lakh rupees per day of continuing failure, capped at one crore rupees. The quantum was assessed against the factors in Section 15J.

What Happens Next

The order directs the research analyst to pay the Rs 6 lakh penalty within 45 days of receiving the order, through SEBI's online payment facility. If the penalty is not paid, the order states that SEBI may initiate recovery proceedings under Section 28A of the SEBI Act, which can include attachment and sale of movable and immovable property, along with interest.

Like any order of a SEBI adjudicating officer, it is appealable before the Securities Appellate Tribunal (SAT), with a further appeal on questions of law to the Supreme Court.

On the research analyst's status, the order records his submission that he applied to surrender his research analyst registration on 15 September 2025, that the outsourcing arrangement was discontinued in July 2024, that an outsourcing policy was formulated in July 2025, and that he has earned no income from the registration since October 2024. In assessing penalty, the adjudicating officer noted that the material on record did not indicate quantified investor loss or repetitive defaults, and that these were the first proceedings against him since registration on 31 March 2022.

What It Means

For retail investors, the order is a useful reminder of how paid stock-tip services can operate. A SEBI registration number on a website or WhatsApp message tells you that a particular research analyst is registered. It does not tell you who is actually calling you, collecting your KYC documents or receiving your subscription fee. In this case, according to the order, a third party ran client on-boarding and KYC under a registered analyst's name and received about 90 per cent of the fees.

There are practical checks worth running before paying any advisory or research subscription. Verify the registration on SEBI's intermediary lists at sebi.gov.in, and confirm that the name, registration number and contact details match exactly. Pay only into a bank account in the registered entity's own name. Be wary when the person calling you cannot explain their relationship with the registered analyst, or when payment is requested into a third party's account. Research analysts are also required to publish monthly complaint data, so a missing or stale complaints table is a warning sign in itself. Complaints against a registered intermediary can be lodged on the SEBI SCORES portal.

FAQ

What exactly did SEBI order?

The SEBI adjudicating officer imposed a penalty of Rs 6,00,000 on research analyst Rishabh Tanwar under Section 15EB of the SEBI Act, 1992, through Adjudication Order No. Order/MS/SM/2026-27/32789 dated 22 October 2026. The order held six violations established, relating to outsourcing without a binding contract or policy, inadequate due diligence, loss of KYC records for 471 of 509 clients, outsourcing of KYC and grievances, and non-display of monthly complaint data.

Did the research analyst respond to the findings?

Yes. According to the order, he admitted all six lapses, did not contest the allegations, and confined his submissions to the amount of penalty. He described the defaults as failures of documentation and oversight arising from inexperience. He has not otherwise publicly responded to the order.

Can the order be appealed?

Yes. Orders passed by a SEBI adjudicating officer can be challenged before the Securities Appellate Tribunal within the statutory time limit, and SAT decisions can be appealed to the Supreme Court on questions of law. The order does not mention any appeal. If the penalty is not paid within 45 days, SEBI may begin recovery proceedings under Section 28A of the SEBI Act.

How can I check if a research analyst is genuinely registered?

Use the list of registered intermediaries on the SEBI website, searching under research analysts, and match the name, registration number and contact details exactly. Pay fees only into an account in the registered entity's own name; a registration number alone does not confirm who you are dealing with.

Were investors reported to have lost money?

The order states that the material on record did not indicate the amount of loss caused to any investor or group of investors as a result of the violations. The research analyst submitted that no affected client suffered loss from the missing KYC records. One investor grievance was lodged through SCORES during the period, which he said he handled personally.

This report is based on the official SEBI adjudication order dated 22 October 2026 in the matter of Rishabh Tanwar, read with its corrigendum of the same date. The full order text is available as a PDF on sebi.gov.in.