The Securities and Exchange Board of India (Sebi) released two separate orders on January 30, 2025, imposing penalties totalling Rs 12 lakh, on Motilal Oswal Financial Services and Anand Rathi Shares and Stock Brokers.
The market regulator has imposed a fine of Rs 7 lakh on Motilal Oswal Financial Services and Rs 5 lakh on Anand Rathi Shares and Stock Brokers in two separate cases for stock broker violations
The Securities and Exchange Board of India (Sebi) released two separate orders on January 30, 2025, imposing penalties totalling Rs 12 lakh, on Motilal Oswal Financial Services and Anand Rathi Shares and Stock Brokers.
These orders were released in the light of the ongoing investigations by Sebi on both these entities.
Sebi has imposed a fine of Rs 7 lakh on Motilal Oswal Financial Services (MOFSL) and Rs 5 lakh on Anand Rathi Shares and Stock Brokers in separate cases. Both are accused of violating stock broking and depository participant regulations.
MOFSL has been ordered to pay the penalty amount within 45 days. This inspection was carried out between April 2021 and June 2022. Conversely, the investigations on Anand Rathi was carried out between April 2020 and October 31, 2021.
A part of the 62-page order by Sebi stated, “After taking into consideration the facts and circumstances of this case, materials available on record, submissions made by the Noticee and also the factors mentioned in the preceding paragraphs, in exercise of the powers conferred upon me under Section 15-I of the SEBI Act, 1992 r/w Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, I hereby impose a penalty of Rs 7,00,000 (Rupees seven lakh only), as per the table below, on the Noticee, for the aforementioned violations, as discussed in this order. In my view, the said penalty will be commensurate with the violation committed by the Noticee”.
Sebi had also noticed that MOFSL had failed to correctly upload their weekly data of Cash and Cash Equivalent balances in 57 such instances.
MOFSL also misreported the margin collection in cash, futures and options (F&O) and currency derivatives segments due to technical errors (according to MOFSL a bug in the system caused this), leading to the incorrect reporting of Rs 1.16 crore.
As much as 334 complaints are still unresolved on MOFSL's end for more than 30 days; it also held Rs 1,719.94 crore in associate companies, violating norms, securities worth Rs 39.65 crore were misreported as MTF collateral.
Sebi has also warned MOFSL that if the penalty is not paid within the given timeframe, it might initiate consequential actions.
On October 11, 2023, Sebi issued a Show Cause Notice to Anand Rathi to know why the firm should not be investigated and a fine should imposed on it.
Sebi conducted an investigation of books of accounts and other records of Anand Rathi Shares and Stock Brokers (a Sebi-registered stock broker and depository participant) between November 25, 2021 to December 15, 2021 for the inspection period of April 1, 2020 to October 31, 2021.
The inspection revealed multiple violations, such as: Anand Rathi allegedly used credit card balance clients' funds to meet obligations of debit balance clients and/or for its own purposes. The misused amount ranged from Rs 22.07 lakh to Rs 16.36 crore in some cases, and Rs 90.75 crore in one instance.
The firm did not maintain records of fund transfers between client accounts and proprietary accounts, it also failed to follow up with untraceable clients for fund settlements. It also reported incorrect margin collection amounts to the National Stock Exchange (NSE), with discrepancies amounting to Rs 20.45 lakh in nine such cases.
Trades were executed without clients' consent in 28 cases. It also misreported financial data relevant to client debit balances under Risk-Balances Supervision (RBS), and collected inadequate margins from clients and allowed exposure to securities that were not permitted under the margin trading facility (MTF).
After taking into consideration the facts and circumstances of the case, records and submissions made by the Noticee, Sebi imposed a final penalty of Rs 5 lakh, with a deadline of 45 days to pay the fine.