Misuse of clients’ fund; Investment Entity fined Rs 27 lakh by SEBI [Read Order]

Misuse of clients’ fund; Investment Entity fined Rs 27 lakh by SEBI [Read Order]

Misuse of clients’ fund - Investment Entity - SEBI - Taxscan

The Securities and Exchange Board of India(SEBI) imposed a fine of Rs. 27 lakhs on M/s Asit C Mehta Investment Intermediaries Ltd. for a series of violations, including misuse of clients’ funds.

A joint inspection was conducted by Sebi, Bombay Stock Exchange (BSE), National Stock Exchange (NSE), and the Central Depository Services Ltd (CDSL) into the broking and depository participant operations of the entity from April 2017 to September 2018. It was found in the inspection the entity committed violations like Failure to segregate securities and monies of clients, Incorrect reporting of Enhanced Supervision data, Non-reporting of Enhanced Supervision data, non-settlement of funds and securities of clients. Discrepancies in terminal related requirements, Non-maintenance of daily reconciliation statement, and Incorrect retention statement.

Prasanta Mahapatra, the adjudicating officer appointed to enquire into and adjudged the alleged violations while passing the order held, “In the present matter, it is noted that no quantifiable figures are available to assess the disproportionate gain or unfair advantage made as a result of the defaults by the Notice. Further, from the material available on record, it may not be possible to ascertain the exact monetary loss to the investors /clients on account of a default by the Notice. As regards the repetitive nature of the default, I do not find that the Inspection having brought on record any regulatory action taken by SEBI in past against the Notice for violations/undercharging provisions, same as observed in the instant inspection. I observe that there are no investor complaints on record arising out of failure on the part of the Notice. However, I cannot ignore the fact that the Notice was under a statutory obligation to abide by the provisions of the SCRA, SEBI Act, Rules and Regulations, and Circulars/directions issued thereunder, which it failed to do during the inspection period.

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