SEBI Closes Inspection Against IIFL Securities, Cites Minor Procedural Lapses

The Securities and Exchange Board of India (SEBI) has closed the investigation into IIFL Securities Ltd., after the conclusions reached from an inspection conducted on the brokerage between April 1, 2022, and July 31, 2022. The regulatory body had inspected to check the compliance level with SEBI (Stock Brokers) Regulations, 1992, and many other relevant circulars. SEBI had found that major issues highlighted through the inquiry process were procedural. Minor lapses were found in account settlements, retention statements, stock reconciliation, closure of client collateral accounts, and margin reporting.

The order issued on Friday stated that SEBI held that the charges levelled against it included delayed settlement of accounts which were inconsequential for a small percentage of the total accounts, wrong retention statements, and the discrepancy in the stock reconciliation process that were not considered significant enough to invite any regulatory intervention. The lapses were viewed as minor ones without significant implications on the market or clients.

IIFL Securities responded to the findings of the regulator in detail stating technical and large operational scale was the reason for errors occurring. However, it clarified that no customer incurred a financial loss on account of the issues identified. In addition, IIFL Securities stated that it had taken significant measures to address gaps in its processes, enhancing its internal systems, risk management procedures, and compliance practices.

The corrective measures that IIFL Securities had initiated were taken into account during the investigation. The regulator also noted that subsequent inspections conducted by stock exchanges, depositories, and the regulator itself did not have any major issues of non-compliance. Such efforts were viewed as positive, and the regulator noted that there were no recurring lapses following the previous penalty of Rs 11 lakh it had imposed on the brokerage in August of the previous year.

In its order issued on its last date for closure, the regulator has shown its acknowledgement about the lapses not being too serious to have adverse effect on any of the aforesaid areas. Thereby, ending the matter there without giving the brokerage any directions beyond this step. The entire action reflects upon the assessment and consideration of the SEBI in future, since the brokerage addressed all the found issues, thereby fulfilling the objective.