sebi:Order/GR/KG/2019-20/6637

SEBI · SEBI · 2009-12-03 · G. Ramar, Adjudicating Officer

Reviewed by Varun Matlani, Advocate — Securities Lawyer practicing in SAT and SEBI

Facts / Headnote

Penalty imposed on the Noticee for non-settlement of client accounts

Provisions invoked

• s. 15
• s. 19
• s. 15H
• s. 15I
• s. 28A

Regulations relied on

• SEBI (Stock Brokers) Regulations, 1992

Parties

• SW Capital Private Limited

Holding

The Noticee failed to settle the accounts of its clients within the stipulated period as required by SEBI Circulars dated December 03, 2009 and September 26, 2016, and a penalty of Rs. 5,00,000/- was imposed under Section 15HB of the SEBI Act read with Regulation 26(xv) of the Brokers Regulations.

Full text

Adjudication Order in respect of SW Capital Private Limited Page 2 of 14 D. The unsettled active client accounts ranged from 2.3% to 12.6% and the total value of unsettled funds & securities ranged from 1.6 Crores to 8.8 Crores during the inspection period.

Adjudication Order in respect of SW Capital Private Limited Page 3 of 14 6. The Noticee vide letter dated December 12, 2019, while denying the allegations contained in the SCN, sought a time period of 30 days for filing its reply. Vide letter dated January 10, 2020, the Noticee was provided an opportunity of personal hearing on January 21, 2020 and was also advised to file its reply, if any, within that period. Thereafter, vide letter dated January 18, 2020, the Noticee replied to the SCN. In the said reply, the Noticee has inter alia submitted as provided herein below:

Adjudication Order in respect of SW Capital Private Limited Page 4 of 14 g. There are certain clients who decide to always have a fixed amount remaining with the broker, since in their understanding that is the allocation of funds done by them out of their different investment portfolios. The client in this type of cases is hesitant to settle the account since he feels that a particular amount should always remain with the broker for investing in any scrip. Considering this the Noticee has always maintained sufficient balances in its bank accounts and the funds were to be paid immediately on receipt of any request from the client. An analysis of the balances of unsettled clients with balance in the account of the Noticee, it is revealed that except for one quarter, the Noticee had sufficient balance to meet any kind of eventuality.

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