sebi:Order/PM/AN/2021-22/11804

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

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Facts / Headnote

Penalty of Rs. 17,00,000 imposed under Section 23D of SCRA and Section 15HB of SEBI Act

Provisions invoked

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

Regulations

• Reg. 199
• Reg. 6
• Reg. 9(f)
• Reg. 3
• Reg. 9
• Reg. 58

Parties

• Balance Equity Broking (I) Pvt. Ltd.

Holding

The Noticee violated client fund/segregation, pledging, KYC, email/mobile, contract note, margin reporting, client funding and enhanced supervision norms, and is liable for monetary penalty under Section 23D of SCRA and Section 15HB of SEBI Act.

Full text

Adjudication Order in respect of Balance Equity Broking (I) Pvt. Ltd. Page2 of 46 (hereinafter referred to as “SCRA”) and Sections15HB of the Securities 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: a) Section 23D of SCRA read with Clause 1 of SEBI Circular SMD/SED/CIR/93/23321 dated November 18, 1993 (hereinafter referred to as “SEBI Circular dated November 18, 1993”) and Clause 3 of Annexure of SEBI Circular SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016(hereinafter referred to as “SEBI Circular dated September 26, 2016”) b) Section 23D of SCRA read with SEBI Circular dated November 18, 1993 and Clause 2.5 of Annexure of SEBI Circular dated September 26, 2016 c) SEBI Circular CIR/MIRSD/16/2011 dated August 22, 2011 (hereinafter referred to as “SEBI Circular dated August 22, 2011”) d) Clause 2(B) of SEBI Circular CIR/MIRSD/15/2011 dated August 2, 2011 (hereinafter referred to as “SEBI Circular dated August2, 2011”) e) Clause B(2) in Schedule II of Regulation 9 of (Stock Brokers) Regulations, 1992(hereinafter referred to as “Brokers Regulations”) f) NSE circular NSE/CMPT/03167 dated Feb 01, 2002 (hereinafter referred to as “NSE Circular dated February01, 2002”)read with NSE circular NSE/CMPT/13061 dated September 10, 2009 (hereinafter referred to as “NSE Circular dated September 10, 2009”)

Adjudication Order in respect of Balance Equity Broking (I) Pvt. Ltd. Page3 of 46 September 25, 2017 (hereinafter referred to as “SEBI Circular dated September 25, 2017”)

Adjudication Order in respect of Balance Equity Broking (I) Pvt. Ltd. Page4 of 46 19.45 crore for the selected sample days. The Noticee, vide its reply dated February 14, 2019 to the inspection team, had submitted the revised calculation of mis-utilization of clients’ funds wherein it was shown that range of mis- utiization was Rs. 9 Crore - Rs. 14 Crore instead of Rs. 12 Crore-19 Crore as identified by SEBI inspection team. Therefore, the Noticee had admitted mis- utilzation clients’ funds and securities. Further, the Noticee had submitted that it has sufficient stock of clients to cover their outstanding. However, as per enhanced supervision circular stock is not included in the calculation of mis- utilization. Therefore, Noticee’s submission was not accepted by the SEBI inspection team. (ii) Incorrect utilization of clients’ funds: For 16 instances pertaining to 8 clients, the Noticee had made payment to client in excess of credit balance in the ledgers. The range of excess payments to clients was Rs 506 to Rs 29.7 lakh. For one instance, the Noticee had made advance tax payment of Rs 1 lakh on behalf of client. The payments were made from clients’ account. The Noticee, vide its reply dated February 14, 2019 to the inspection team, had submitted that payment was made in excess of credit balance was due to sale of clients’ shares. Further, for one instance advance tax has been paid on behalf of client and payment was made from clients’ account. Therefore, the Noticee had ad

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