sebi:Order/PM/AN/2021-22/11803

SEBI · SEBI · 1993-11-18 · Prasanta Mahapatra, Adjudicating Officer

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Facts / Headnote

Penalty of Rs. 7,00,000 imposed on the Noticee

Provisions invoked

• s. 15
• s. 12
• s. 15J
• s. 23J
• s. 15F
• s. 23
• s. 23D

Regulations

• Reg. 17

Parties

• Grovalue Commodity Private Limited

Holding

The Adjudicating Officer held Grovalue Commodity Private Limited violated client-fund segregation, running-account settlement, margin reporting, CKYC, enhanced-supervision and record-keeping provisions and imposed a penalty of Rs. 7,00,000 under Section 23D of the SCRA and Sections 15F(a) and 15HB of the SEBI Act.

Full text

Adjudication Order in respect of Grovalue Commodity Private Limited Page2 of 31 and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) for the alleged violations of below mentioned provisions of SCRA/ SEBI Act and/ or Rules or Regulations or Directions made or issued thereunder:

Adjudication Order in respect of Grovalue Commodity Private Limited Page3 of 31 4. Show Cause Notice No. SEBI/EAD/PM/RR/11598/1/2020 dated July 10, 2020 (hereinafter referred to as “SCN”), was issued to the Noticee in terms of Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties#) Rules, 1995 r/w Section 15-I of the SEBI Act and Rule 4 of the Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties #) Rules, 2005 r/w Section 23-I of the SCRA in the matter of "M/s. Grovalue Commodity Private Limited". SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 and Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 shall hereinafter be referred to as Adjudication Rules. [# With effect from March 8, 2019, (i) SEBI (Procedure of Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 was amended to SEBI (Procedure of Holding Inquiry and Imposing Penalties) Rules, 1995 and (ii) Securities Contracts (Regulation) (Procedure of Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 2005 was amended to Securities Contracts (Regulation) (Procedure of Holding Inquiry and Imposing Penalties) Rules, 2005]

Adjudication Order in respect of Grovalue Commodity Private Limited Page4 of 31 clients to clear their debit balance or interest accrued on it, the Noticee cannot transfer funds under the head of GST. Hence total client funds misused was Rs. 7,906,896.62 (i.e., 3,606,102.45+3,644,740.82+656,053.35). Monthly/Quarterly settlement of funds and securities (iv) Out of the sample selected for 30 clients, accounts with respect to 13 clients were not settled on monthly/quarterly basis. Further, the Noticee had not provided data to the SEBI inspection team on (i) settlement of running accounts of client funds and securities and (ii) statement of accounts with respect to funds and securities sent to the clients. In addition, the Noticee had not provided any data pertaining to settlement of active clients despite instructions given by SEBI inspection team during inspection as well as subsequent reminders through email. Additionally, it was observed by inspection team that the Noticee had delayed the settlement of inactive clients. (v) With regard to above, Noticee submitted to the inspection team that due to technical glitch in back office software system, data could not be fetched properly at the time of inspection. Reporting of margin and short collection of margin (vi) It was observed by SEBI inspection team that out of 211 instances, in 6 instances, there were wrong reporting of initial margin to NCDEX and the total shortfall was Rs. 1,091. Out of 263 instances for 50 clients, the e

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