Markets regulator Sebi Thursday imposed a penalty of Rs 10 lakh on stock broker Choice Equity Broking for misusing clients' fund.
Markets regulator Sebi Thursday imposed a penalty of Rs 10 lakh on stock broker Choice Equity Broking for misusing clients’ fund. The Securities and Exchange Board of India (Sebi) carried out an inspection of broking operations of Choice Equity from April 2015 to September 2016. The inspection revealed that the stock broker was misusing funds of clients with credit balance to settle obligations of clients with debit balance.
By doing so, the stock broker violated Sebi’s November 1993 circular which barred brokers from using excess funds of one client to meet liability of another client, the regulator said. Besides, it required brokers to not only keep separate accounts for clients’ and own dealings but also to not withdraw money from clients’ account except in the situations provided, Sebi added.
The violation of circular warrants imposition of monetary penalty under SCRA (Securities Contract (Regulation) Act), the regulator said, and imposed fine of Rs 10 lakh on Choice Equity Broking Pvt Ltd. In a separate order, Sebi also imposed a total fine of Rs 8 lakh on five persons belonging to promoter group of Palred Technologies for disclosure lapses. Palem Srikanth Reddy, Sanitha Reddy, Stuthi Reddy, P Soujanya Reddy and Dakshayani Reddy are the five persons belonging to promoter group. Among them, Sanitha Reddy is a minor and the fine levied on her is to be paid by Palem Srikanth Reddy, the regulator said.
“The very fact that Noticees (promoter group) have delayed in making disclosures when they were required to do so under provisions of SAST Regulations and PIT Regulations, warrants that penalty shall be imposed for such violation,” Sebi said. SAST pertains to Substantial Acquisition of Shares and Takeovers, while PIT stands for Prohibition of Insider Trading.