sebi:Order/KS/VC/2020-21/8672
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Facts / Headnote
Penalty imposed totalling Rs. 5,00,000 - Rs. 4,00,000 under Section 23D of SCRA and Rs. 1,00,000 under Section 15HB of SEBI Act
Provisions invoked
- s. 15
- s. 12A
- s. 12
- s. 15H
- s. 15J
- s. 15F
- s. 28A
- s. 23J
- s. 23
- s. 23D
Parties
- C D Integrated Services Ltd. / C D Integrated Services Private Limited
Holding
The Noticee violated Section 23D of SCRA read with SEBI Circular dated November 18, 1993 and Clause 3.3.1 of SEBI Circular dated September 26, 2016 by mis-utilising credit balance clients' funds and indirectly funding clients through wholly-owned subsidiaries, along with other circulars, and was held liable for monetary penalty under Section 23D of SCRA and Section 15HB of SEBI Act.
Full text
Page 2 of 39 Bombay Stock Exchange (hereinafter referred to as “BSE”) and the National Securities Depository Limited (hereinafter referred to as “NSDL”) conducted a comprehensive joint inspection of the broking and depository participant operations of C D Integrated Services Ltd. (hereinafter referred to as “CDISL / Noticee”). The period of inspection was from April 2017 to September 2018 (hereinafter referred to as “IP”).
Page 3 of 39 2016 read with Clause 2(d) of SEBI Circular CIR/HO/MIRSD/MIRSD2/CIR/P/2017/64 dated June 22, 2017; (e) Clause 7 of Annexure of SEBI Circular SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016; and (f) Clause 6.1.1(j) of Annexure of SEBI Circular SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016 read with Rule 33 of Chapter III of the Rules of NSEIL and NSE Circular NSE/MEMB/2739 dated July 30, 2001. APPOINTMENT OF ADJUDICATING OFFICER
Page 4 of 39 Act and Section 23D of the SCRA for the violations alleged to have been committed by the Noticee. 5. The following violations were alleged in the SCN to have been committed by the Noticee: A. Non-segregation/Mis-utilization of clients’ funds (SEBI and BSE Observations): (a) During inspection, based on the principles and guidelines stipulated in clause 3 of “Enhanced Supervision of Stock Brokers/Depository Participants” circular dated September 26, 2016, reconciliation of clients’ funds lying with the Noticee was done with the total available funds, i.e., cash and cash equivalents to detect any mis-utilization of clients’ funds for 28 sample dates. Total funds available with the Noticee, i.e., fund balance available in the client bank accounts and settlement account maintained by the Noticee (Column A of Table 1 below) and collateral deposited by the Noticee with the exchanges/ clearing corporation/ clearing member (Column B of Table 1 below) was verified from bank statements and daily margin statements respectively. (b) The total funds available with the Noticee was then compared with the ledger balance of the credit balance clients (Column C of Table 1 below) to find out whether the total funds is lesser or greater than the clients’ funds as per ledger balance, i.e., G = (A+B)-C. The positive value of ‘G’ indicates that a broker has sufficient funds to settle the credit balance clients while the negative value indicates utilization of funds of credit balance cli
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Source: SecMarx — sebi:Order/KS/VC/2020-21/8672. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.