The Securities and Exchange Board of India found that there were instances where the broker had indulged into intermingling or misuse of clients' funds.
Markets regulator Sebi on Friday slapped a fine of Rs 17 lakh on Motilal Oswal Financial Services Ltd for failing to comply with Sebi’s circular that mandated stock brokers to segregate the funds and securities of the clients.
The order follows an inspection conducted by Sebi between April 2012 to March 2014. The Securities and Exchange Board of India found that there were instances where the broker had indulged into intermingling or misuse of clients’ funds.
The broker utilised the credit balance lying in the clients’ bank account towards meeting its own or other clients’ obligations.
“Instances of misutilisation of funds of the clients on 11 sample days out of the 20 sample days represent approximately 55 per cent of the sample dates selected by the inspection team,” the order said.
The amount of misutilisation was in the range of Rs 5.01 crore to Rs 102.06 crore for the sample dates, it added.
“The Noticee (Motilal Oswal) has failed to maintain segregation of client’s funds, and further misused the clients’ funds, thereby violating the provisions of the Sebi circular …dated November 18, 1993,” Sebi said.
As per the regulator’s circular issued in November 1993, the stock brokers shall keep the money of the clients in a separate account and their own money in a separate account. Besides, no payment for transactions in which the member broker is taking a position as a principal will be allowed to be made from the client’s account.
Since Motilal Oswal Financial Services failed to comply with the regulator’s circular, monetary fine has been levied by the regulator.