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Order in respect of Mr. Mansoor Rafiq Khanda & Ors.

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WTM/RKA/ISD /108/2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

UNDER SECTION 11 AND 11B OF THE SECURITIES AND EXCHANGE BOARD
OF INDIA ACT, 1992 IN RESPECT OF MR. MANSOOR RAFIQ KHANDA AND
MR. FEROZ RAFIQ KHANDA
Appearances:
For Noticees:
Mr. Tushar V. Shah, Advocate

Sl. No. Name of the noticee PAN
1.
Mr. Mansoor Rafiq Khanda (proprietor of M/s Indian Trading
Company, M/s Option & M.C.X King, M/s A to Z Solution and
M/s Fullon Corporation)
ALMPK3448B
2. Mr. Feroz Rafiq Khanda (proprietor of M/s Fullon Corporation) AFMPK5766J
___________________________________________________________________________

1. Vide ad interim ex-parte order dated June 05, 2014 (hereinafter referred to as the 'interim order')
Mr. Mansoor Rafiq Khanda (proprietor of M/s Indian Trading Company, M/s Option &
M.C.X King, M/s A to Z Solution and M/s Fullon Corporation) and Mr. Feroz Rafiq
Khanda (proprietor of M/s Fullon Corporation) (hereinafter collectively referred to as the
'noticees' or by their respective names) were restrained from accessing the securities market
and were prohibited from buying, selling or dealing in securities, in any manner whatsoever,
till further directions. They were further directed to:

(a) cease and desist from acting as an investment advisors and not to solicit or undertake
such activities or any other unregistered activity in the securities market, directly or
indirectly, in any manner whatsoever;
(b) immediately withdraw and remove all advertisements, representations, literatures,
brochures, materials, publications, documents, websites, etc. in relation to their
investment advisory or any unregistered activity in the securities market.

2. The interim order was passed on the basis of prima facie findings that the noticees had been
offering trading tips through Short Message Services (SMSs)/WhatsApp sent from mobile
numbers (viz., 9913266412, 8306257818, 9173461311, 09925305293 and 8306773041) and
websites, namely, www.fullonoption.com. The contents of the messages were as follows:

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Order in respect of Mr. Mansoor Rafiq Khanda & Ors. Page 2 of 6

"My company Indian trading provides tips, 25000 deposit payment profit 30% share. Sir 50000
only investment and 200% sure guarantee call. 1 Re no loss"

"Earn more than 25 to 50 Lakh per month in our Super Jackpot Stock-Mcx- Currency Tips -
9925305293"

3. These messages also carried certain enticing claims such as:
(a). total profit `9 lakh in `2 lakh capital;
(b). `9 lakh in one month with `50,000/- capital;
(c). earn more than `25 lakh to `50 lakh per month in our superjackpot stock MCX;
(d). Profit `8 lakh in `1 lakh capital;
(e). Profit `18 lakh in `1 lakh capital.

4. SEBI had received complaints in the above regard and upon making telephone calls, during
the preliminary examination, to the mobile numbers used for the above SMSs it is noted that
the operators of these mobile numbers directed the callers to their websites
(www.fullonoption.com) and make necessary registration fee payment into their bank
account(s). It was noted that the noticees followed the following modus operandi:

i. Send SMS to investors with inducing claims and citing references to the website
addresses viz., www.fullonoption.com, inviting prospective investors to enrol with
them for their investment advisory services for a registration fee.
ii. The registered clients are then provided trading tips for a consideration/profit
sharing.

5. It has also been prima facie found in the interim order that the noticees engaged in the activities
of giving trading tips, stock specific recommendations, etc. to the investors on a contractual
basis on payment of fees which fall within the definition of activities of investment advisor as
defined under regulation 2(m) of the SEBI (Investment Advisers) Regulations, 2013
(Investment Advisors Regulations). Since they have acted as investment advisors without
obtaining registration from SEBI they have prima facie contravened the provisions of section
12(1) of the SEBI Act, 1992 read with provisions of regulation 3 of the Investment Advisers
Regulations. It has been further prima facie found in the interim order that the noticees have
made known misrepresentations by making unrealistic claims and they have also made
representation in reckless and careless manner in their messages and website and have
suggested facts which are not true. By their acts and omissions they have solicited, enticed
and induced investors to deal in securities on the basis of their investment advices, stock
trade tips, etc. Thus, noticees who were connected with each other have prima facie acted in
fraudulent and deceitful manner and contravened the provisions of section 12A (a) (b) and
(c) of the SEBI Act and regulation 3 (b), (c) and (d) and regulation 4(1) and 4(2) (k) and (r) of
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the of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities
Market) Regulations, 2003 (PFUTP Regulations).

6. Pursuant to the interim order, the noticees filed their common reply vide letter dated June 17,
2014 wherein they inter alia made the following submissions:
(a). Mr. Feroz Rafiq Khanda has assumed full responsibility in respect of the
allegations/charges in the interim order. He has submitted that his brother, Mr. Mansoor
Rafiq Khanda is fully occupied in his textile business and has not participated in any of
the activities as referred to in the interim order. Mr. Feroz Rafiq Khanda has also prayed
that the allegations/charges against Mr. Mansoor Rafiq Khanda be dropped.
(b). Though the bank accounts described in the interim order were in the names of Mr.
Mansoor Rafiq Khanda and Mr. Feroz Rafiq Khanda, they were controlled by Mr. Feroz
Rafiq Khanda. Mr. Mansoor Rafiq Khanda had no knowledge about the activities being
carried on by Mr. Feroz Rafiq Khanda.
(c). The noticees have completely stopped their activities since August 2013 and the website
www.fullonoption.com is not operational since September, 2013. Similarly, the email id
fulloncorp@gmail.com is also now non-operational/discontinued.
(d). The noticees have not asked any person or investors to entrust them with any funds and
have not caused any loss to the investors.
(e). No complaints are received from the investors regarding any substantial losses or
misguidance.
(f). The noticees have not made any huge gain.
(g). In the absence of any complaint of having made any misrepresentations of reckless and
careless nature or of unrealistic claims, the noticees may not be taken to have acted in
"fraudulent manner" or "deceitful manner" and the provisions of 2(1) (c) of the PFUTP
Regulations may not be invoked. Thus, it may not be viewed as attracting prohibitions
enshrined in section 12A(a)(b) and (c) of the SEBI Act and regulation 3(b),(c) and (d)
and 4(1), 4(2)(k) and (r) of the PFUTP Regulation.
(h). The noticees did not realize that their activities require registration under the SEBI Act,
1992 and the Investment Advisors Regulations. Considering the facts and circumstances
and the fact that the noticees have realized their lapse, they may not be treated as
unregistered Investment Advisors and may be pardoned.

7. The noticees were also given an opportunity of personal hearing on August 12, 2014 when
Mr. Tushar V. Shah, Advocate, appeared and made inter alia the following oral submissions
on their behalf :
(a) It was actually Mr. Feroz Rafiq Khanda who had been undertaking the activities alleged
in the interim order and his brother Mr. Mansoor Rafiq Khanda had no knowledge or
connection with the activities of Mr. Feroz Rafiq Khanda as he is exclusively occupied in
his textile business.
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(b) In view of these facts the allegations/charges against Mr. Mansoor Rafiq Khanda be
dropped.
(c) Mr. Feroz Rafiq Khanda has stopped the activities as alleged in the interim order and the
website www.fullonoption.com is not functional/operational since September 2013.
(d) After August 2013, Mr. Feroz Rafiq Khanda has stopped undertaking any activity as
alleged in the interim order and as such the allegations/charges qua Mr. Feroz Rafiq
Khanda be dropped.

8. With regard to the observations in para 20 of the interim order in respect of the activities of
Mr. Imtiyaz Hanif Khanda (proprietor of M/s. Right Trade and M/s. Sai Traders), Mr. Vali
Mamad Habib Ghaniwala (proprietor of M/s Bull Trader and M/s Laxmi Traders), the
counsel for the noticees confirmed that Mr. Imtiyaz Hanif Khanda is related to the noticees
in this case.

9. I have carefully considered the allegations/charges against the noticees, their replies and
relevant material available on record. It is noted that while admitting to the allegations/
charges described in the interim order Mr. Feroz Rafiq Khanda has attempted to take up the
sole responsibility with regard to the allegations/charges described in the interim order. With
regard to the submissions of the noticees in this regard, I note that the bank account no.
'913020051857131' as disclosed on the WhatsApp message to the prospective investors is in
the name of M/s Indian Trading Company. It is undisputed fact that Mr. Mansoor Rafiq
Khanda is the sole proprietor of M/s Indian Trading Company and the said bank account
no. '913020051857131' with Axis Bank, Surat, Gujarat was opened and operated by him.

10. It is further noted that the following bank accounts were disclosed on the website of
www.fullonoption.com for making payments by the prospective investors.

Sr.
No.
Entity Bank Account
No.
Bank Name and
Branch
Proprietor Address
1 M/s Fullon
Corporation
085005500802 ICICI Bank, Surat,
Gujarat.
Mr.
Mansoor
Rafiq
Khanda
A/605, Shilpraj
Apartment,
Adajan Patiya,
Surat, -395009
Gujarat
2. M/s Fullon
Corporation
33131936514 State Bank of India Mr. Feroz
Rafiq
Khanda
Flat No . A/7,
Sardar Complex,
Gujarat Housing
Board,
Adajan,Surat-
395009
913020033489310 Axis Bank, Surat,
Gujarat
50200001578790 HDFC Bank, Surat,
Gujarat

11. From the KYC and account opening forms of the ICICI Bank, State Bank of India and Axis
Bank , it is noted that Mr. Mansoor Rafiq Khanda and his brother Mr. Feroz Rafiq Khanda
are the common proprietors of M/s Fullon Corporation. Furthermore, from the PAN details
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of Mr. Mansoor Rafiq Khanda and Mr. Feroz Rafiq Khanda, it is noted that two more bank
accounts in the name of M/s Option & M.C.X King and M/s A to Z Solution, respectively
whose sole proprietor is Mr. Mansoor Rafiq Khanda, were used for receiving payments from
the prospective investors. Following are the details of the said bank accounts:

Sr. No. Entity Bank Account No. Bank Name
and Branch
Proprietor Address
1 M/s Option &
M.C.X King
913020052272399 Axis Bank,
Surat,
Gujarat.
Mr. Mansoor
Rafiq Khanda
Flat No .
A/7,
Sardar
Complex,
Gujarat
Housing
Board,
Adajan,Su
rat-
395009
2. M/s A to Z
Solution
913020051407482 Axis Bank,
Surat, Gujarat

12. The above facts and circumstances prima facie indicate the role of Mr. Mansoor Rafiq Khanda
in the alleged activities done using the above bank accounts or at least they were undertaken
by Mr. Feroz Rafiq Khanda with his knowledge and complicity. I, therefore, am not inclined
to accept the contention that Mr. Mansoor Rafiq Khanda had no knowledge or connection
with the activities alleged in the interim order.

13. From the material available on record it is noted that the noticees continued their activities
and invited investments using SMSs/WatsApp chat with the complainant even during
November 2013. Further, pursuant to the SMSs/WhatsApp, exchanged between the noticees
and complainant on December 13, 2013 the complainant made investments with the
noticees and deposited `25,000/- in the bank account (913020051857131) of the noticees
with Axis Bank. In my view, factors such as receipt of complaint, loss incurred by any
investors, etc. are not the essential factors for taking enforcement actions as done in this
case. Nevertheless, I note that, in this case, SEBI had received complaints from investors
with regard to the activities of the noticees as described in the interim order and some of them
had even complained of having incurred losses on investments made by them on the basis of
advice/enticement of the noticees. In this case, the conduct of the noticees have prima facie
been found inimical to the interest of investors in the securities market and the interim order
has been passed to prevent them from further misleading investors and impairing the
integrity of the market. I, therefore, do not agree with submissions of the noticees.

14. I find that the noticees have not been able to show sufficient and plausible cause to draw any
inference other than those drawn in the interim order with regard to their activities in the
securities market. They have admitted to the alleged activities and have failed to make out a
prima facie case to revoke or modify the directions issued vide the interim order. It is noted that
even after the interim order SEBI has been receiving complaints from the investors against the
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noticees with regard to their prima facie fraudulent activities. Such complaints have pointed
out that the noticees have been using the mobile numbers described in the interim order as
well as some other mobile numbers. Thus, the possibility of involvement of other persons
alongwith the noticees cannot be ruled out. Admittedly, the noticees are connected with
other entities who have prima facie found to have indulged in similar activities adopting the
same modus operandi as that of the noticees and have been restrained vide orders dated August
20, 2013 and December 30, 2013. I further note that the investigations in this case and the
other one are ongoing. In these facts and circumstance, the balance of convenience is also
not in favour of the noticees. The directions issued against the noticee vide the interim order
are preventive and remedial. I, therefore, am of the considered view that no intervention is
called for, at this stage, in either vacating the interim directions or modifying it.

15. I, therefore, in exercise of the powers conferred upon me under section 19 of the Securities
and Exchange Board of India Act, 1992 read with sections 11(1), 11(4) and 11B thereof,
hereby confirm the directions issued in respect of Mr. Mansoor Rafiq Khanda (proprietor of
M/s Indian Trading Company, M/s Option & M.C.X King, M/s A to Z solution and M/s
Fullon Corporation) (PAN: ALMPK3448B) and Mr. Feroz Rafiq Khanda (proprietor of M/s
Fullon Corporation) (PAN: AFMPK5766J) vide ad-interim ex-parte order dated June 05, 2014.

16. The directions issued vide the interim order dated June 05, 2014 shall continue to be in force
till further directions.


Sd/
DATE: September 15
th
, 2014 RAJEEV KUMAR AGARWAL
PLACE: MUMBAI WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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