sebi:Order/BM/RK/2024-25/30289

SEBI · SEBI · 2022-04-12 · Barnali Mukherjee, Adjudicating Officer

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Facts / Headnote

Violations established; penalty of Rs 10,00,000 under Section 23D of SCRA and Rs 5,00,000 under Section 15HB of SEBI Act imposed

Provisions invoked

• s. 15
• s. 19
• s. 12
• s. 15H
• s. 15I
• s. 15J
• s. 23J
• s. 23
• s. 23D

Regulations

• Reg. 6
• Reg. 3
• Reg. 21(1)
• Reg. 9
• Reg. 16

Parties

• Maxpro Asia

Holding

The Adjudicating Officer held Maxpro Asia violated misuse-of-client-funds, reporting, bank segregation/nomenclature, KYC/KRA, contract note and certification norms and imposed Rs 10,00,000 under Section 23D of SCRA and Rs 5,00,000 under Section 15HB of SEBI Act.

Full text

Adjudication order in the matter of Maxpro Asia Page 2 of 41 14, 2021 to December 17, 2021. The period covered in the inspection was from April 01, 2020 to June 30, 2021 (hereinafter referred to as ‘Inspection Period/IP’). 2) The inspection findings were communicated to the Noticee vide SEBI letter dated April 12, 2022 enclosing copy of the Inspection report (hereinafter referred to as IR). After examining the reply submitted by the Noticee vide email dated June 11, 2022, it had been alleged that the Noticee contravened various provisions of the securities law in respect of the activities carried out by it. The extracts of the violations alleged to have been committed by the Noticee and corresponding provision of the securities law are given in the table 1 below:- Table 1: Sr No. Alleged Violations (Summarized) Regulatory Provisions 1 Misuse of clients’ funds and securities Section 23D of SC(R) Act, 1956 read with Clause 1 of SEBI Circular SMD/SED/CIR/93/23321 dated November 18, 1993 and Clause 3 of Annexure of SEBI Circular SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016

Adjudication order in the matter of Maxpro Asia Page 3 of 41 dated September 26, 2016 read with Clause 6.1.1. (f) of Annexure of SEBI Circular SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016 6 Client Registration process (KYC and KRA process) SEBI Circular MIRSD/CIR-26/2011 dated December 23, 2011 read with Clause 5.4 of Schedule III to SEBI (Intermediaries) Regulations, 2008 and Regulation 21(1) of SEBI (Stock Brokers) Regulations, 1992 7 Contract Notes Clause B.2 of Schedule II of Regulation 9 of SEBI (Stock Brokers) Regulations, 1992 8 Terminal verification and certification Regulation 3 of SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007 and Clause B (8) of Schedule II read with Regulation 9 (f) of SEBI (Stock Broker) Regulations, 1992 9 Financial Statement Analysis Clause A (5) of Code of Conduct for Stock Brokers prescribed in Schedule II read with Regulation 9 (b) and 9 (f) of SEBI (Stock Brokers) Regulations, 1992

Adjudication order in the matter of Maxpro Asia Page 4 of 41 said AO, undersigned was appointed as the AO in the matter vide Order dated March 14, 2024 communicated vide communique dated March 19, 2024. SHOW CAUSE NOTICE, REPLY AND HEARING 5) A Show Cause Notice (“SCN”) No SEBI/EAD5/P/OW/2023/43566/1 dated October 26, 2023 was issued to Noticee in terms Rule 4(1) of SEBI Adjudication Rules and Rule 4(1) of SC(R) Rules to show cause as to why an inquiry should not be initiated against it and why penalty, if any, be not imposed upon it under Section 23D of SCRA and Section 15HB of SEBI Act for the aforesaid violations alleged to have been committed by it. 6) The SCN was sent to Noticee through Speed Post AD and via digitally signed Email which was duly delivered on the same day. The proof of service is on record. In response, the Noticee vide letter dated November 07, 2023 made preliminary submission in the matter and sought inspection of documents relied upon in the matter. Accordingly, vide email dated November 28, 2023, the Noticee was granted an opportunity to inspect copies of the documents on December 01, 2023, which was duly availed by the Noticee. Further, vide email dated December 05, 2023, Noticee requested to be provided with additional documents in the matter after

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