sebi:Order/BM/DS/2023-24/30034

SEBI · SEBI · 2023-03-31 · Barnali Mukherjee, Adjudicating Officer

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Violations established; total monetary penalty of Rs 3,00,000 imposed on the Noticee

Provisions invoked

• s. 15
• s. 12
• s. 15H
• s. 15J
• s. 12A
• s. 28A
• s. 23J
• s. 23
• s. 23D

Regulations

• Reg. 7

Parties

• Bullion Fox Commodity Private Limited

Holding

The Adjudicating Officer held Bullion Fox Commodity Private Limited violated client-fund segregation, running-account settlement, bank-account nomenclature, order-placement evidence and UCC requirements and imposed Rs 2,00,000 under Section 23D of SC(R) Act and Rs 1,00,000 under Section 15HB of SEBI Act, totalling Rs 3,00,000.

Full text

Adjudication Order in the matter of Bullion Fox Commodity Private Limited Page 2 of 26 2. The findings/ observations made during the course of inspection were communicated to the Noticee by SEBI vide letter dated March 31, 2023. After examining the reply submitted by the Noticee vide letter dated March 31, 2023, it has been alleged that the Noticee violated various provisions of SC(R) Act, 1956 and applicable SEBI Circulars. The extracts of violations alleged to have been committed by the Noticee and the corresponding regulatory provisions are given in the table below: Table 1 Sr. No. Alleged Violations Regulatory Provisions 1 Misuse of Clients’ funds  Section 23D of SC(R) Act, 1956 read with Clause 1 of SEBI Circular SMD/SED/CIR/93/23321 dated November 18, 1993.  Clause 3 and Clause 6.1.1.j. of Annexure of SEBI Circular SEBI/HO/MIRSD/MIRSD2/ CIR/P/2016/95 dated September 26, 2016. 2 Settlement of Client funds and securities  Clause 12 of Annexure-A of SEBI Circular SEBI/MIRSD/SE/Cir-19/2009 dated December 03, 2009.  Clause 8.1 of Annexure of SEBI Circular SEBI/HO/MIRSD/ MIRSD2/ CIR/P/2016/95 dated September 26, 2016.  Clause 5.4 of Circular SEBI/HO/MIRSD/ DOP/P/CIR/2021/57 dated June 16, 2021. 3 Nomenclature of Bank accounts maintained by the Broker Clause 1.2 and Clause 6.1.1. (f) of Annexure of SEBI Circular SEBI/HO/MIRSD/MIRSD2/CIR /P/2016/95 dated September 26, 2016 4 Non-maintenance of evidence for client

Adjudication Order in the matter of Bullion Fox Commodity Private Limited Page 3 of 26 3. SEBI initiated adjudication proceedings against the Noticee under section 23D of SC(R) Act, 1956, and section 15HB of SEBI Act, 1992 for the alleged violations of the relevant provisions as stated above.

Adjudication Order in the matter of Bullion Fox Commodity Private Limited Page 4 of 26 7. The submissions made by the Noticee are as summarized below: 7.1. Misuse of clients’ funds – Noticee has not used margin money for to settle the debit balance clients or had used for its own purpose. Erroneously there were pop on misutilisation of client fund and the same it had recouped the entire amount on the same day from our settlement account to our Clearing Member (Globe). In this regard, the Noticee submitted a screenshot of the mail which the Noticee has sent to MCX explaining about the pop-up regarding misuse of clients funds for the week ended January 14, 2022. 7.2. Settlement of clients’ funds and securities – it was due to error in back office software, due to which the pop-ups were not generated in time, and this caused delay in settlement of funds. Noticee had raised complaints with its vendor, and it has submitted a screenshot of the email sent to its vendor. 7.3. Nomenclature of bank accounts – all its bank accounts have proper nomenclature, except the general account. 7.4. Non maintenance of evidence for client order placement – due to some issues with the software, some of the files of pre-confirmation order got corrupted. Out of the 14 samples sought during the inspection, the Noticee was able to submit three. 7.5. Mobile number of client not matching with UCC – Noticee has modified the client’s mobile number upon receiving request mail from the client. 7.6. The minor

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