IIFL Securities Limited has been fined 1 crore for violation of rules by the Securities and Exchange Board of India (SEBI). SEBI has conducted several audits of accounts of IIFL and found that the company has violated the SEBI 1993 circular, which states that by failing to segregate its own funds from client funds, debit balances of credit balances of client funds to client funds. Misuse and not properly designating the client are covered. bank accounts.
SEBI conducted a “thematic inspection” of IIFL Securities from January 30-31, 2014 to February 3, 2014 and found that out of 45 customer bank accounts inspected, 26 were not designated as customer accounts. SEBI in an official order stated that “during this inspection, an analysis was conducted in respect of maintenance of separate bank and demat accounts for customers and proprietary funds/securities. In this regard, it was observed that 45 customers whose Bank accounts were checked, 26 of them customer bank accounts not titled “Customer Account”.
“Later, in its response, the Company informed SEBI that it had submitted a request to its bankers for change of title of the above 26 customer accounts to “Customer Account” and provided supporting documents in respect of the same. SEBI also informed SEBI that out of the 45 customer accounts examined, most of the customer accounts are designated as customer accounts. However, on perusal of the above supporting document, it is observed that 3 customer bank accounts still have the title ” The customers were in the process of converting to “Bank Account”, ” SEBI said.
SEBI has also claimed that “during the inspection it was also observed that BSE had issued a warning to the company in respect of the above issue, however, despite the warning from BSE, it was observed that the company failed to change the title of the bank.” Accounts dealing with customer transactions.” In the light of the foregoing, the company was accused of violating the SEBI 1993 circular rules by neglecting to mark the bank accounts used for customer transactions as customer accounts.
SEBI, NSE and BSE conducted a joint investigation, and IIFL submitted a list of 115 bank accounts it was using for its purposes during the extensive inspection. As per the test results, funds were frequently transferred from client bank accounts to Citibank pool/control account, which IIFL manages and controls as its own bank account. As for the violation, SEBI has stated that “In the light of the above paragraph, it was alleged that IIFL has violated the provisions of the SEBI 1993 circular, which mixes its own funds with its client funds in the following manner has been: (i) by transferring the Client’s funds to a normal account i.e. Citibank Pool/Control Account and own funds; and (ii) by using the Citibank Pool/Control Account for its own purposes.”
During inspection, the Citibank Pool/Control account as well as one Axis Bank account were verified as the Company informed the investigation team that the above account is also a pool account. During investigation, however, it was revealed that, apart from funds being transferred from all Axis Bank accounts and client dividend accounts to Axis Bank pool account, Axis Bank pool account was also being used by IIFL for other activities . “In the light of the above, it was alleged that the company has violated the provisions of the SEBI 1993 circular by using Axis Bank pool account for its own receipts and payments with its own funds. It has been utilized for pooling by combining client funds and dividends,” SEBI said in an official notice.
The company also used ICICI Bank account for the following segments: BSE Cash/Futures and Options/Currency Derivatives, NSE Currency Derivatives/Futures and Options, and MCX-SX Currency Derivatives/Cash/Futures and Options, as per the examination. The company used ICICI Bank account for the following segments: BSE Cash/Futures and Options/Currency Derivatives, NSE Currency Derivatives/Futures and Options, and MCX-SX Currency Derivatives/Cash/Futures and Options, as per the examination. During investigation, the company claimed that the HDFC Bank account was also used by the company as a pooling account for funds transferred from various customer accounts.
As per SEBI rule 23D “If any person, who is registered as a stock broker or sub-broker under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), fails to liquidate the securities or money of the client lives. or the use of securities or money of the client or any client or clients for himself or for any other client, he shall *[liable to a penalty which shall not be less than one lakh rupees but which may extend to one crore rupees],
Consequently, the Adjudicating Officer, in an official notice, said that “In exercise of the powers conferred on me under Section 23-I(2) of the SCRA, having regard to all the facts of the case and the contention of the notice, read the SCRA Adjudication Rules. With Rule 5, I hereby impose a penalty of Rs.India Infoline Limited (now known as IIFL Securities Limited) on the notice u/s 23D of SCRA for contravention of the provisions of the SEBI 1993 Circular But 1,00,00,000/- (Rupees one crore only).