sebi:QJA/AB/MIRSD/MIRSD3/27592/2023-24

SEBI · SEBI · 2022-07-29 · Anand R. Baiwar, Executive Director

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Registration of the noticee as a broker suspended for three months; noticee warned to be careful and diligent in conduct of business including recognizing and reporting suspicious transactions

Provisions invoked

• s. 19
• s. 12
• s. 12(3)

Regulations

• Reg. 6
• Reg. 9
• Reg. 9(f)
• Reg. 25
• Reg. 27
• Reg. 26(1)
• Reg. 27(5)
• Reg. 16

Parties

• Edelweiss Broking Limited (Now known as Nuvama Wealth and Investment Limited)

Holding

The noticee was found to have violated Clause A(2) of the Code of Conduct read with regulation 9(f) of the Broker Regulations by failing to report suspicious transactions of its client Mr. Parekh to FIU-IND, and its broker registration was suspended for three months. However, the noticee was absolved of the allegation of failing to exercise due skill, care and diligence in ascertaining the identity of Mr. Parekh at the time of placing orders via telephone.

Full text

Order in respect of Edelweiss Broking Limited (Now known as Nuvama Wealth and Investment Limited) Page 2 of 27 (‘NSE’), had allegedly failed to exercise due skill, care, diligence, professionalism and efficiency in the conduct of its business, in relation to the dealings of one of its clients, viz. Mr. Yatin Vasantrai Parekh (hereinafter referred to as “Mr. Parekh/ Client”). It was observed during the investigation that the noticee had: a) failed to exercise due skill, care, diligence, professionalism and efficiency with respect to ascertaining the identity of Mr. Parekh, at the time of placing orders with the noticee, via telephone; and b) failed to report the dealings of Mr. Parekh, which were not commensurate with his annual income, as declared in the Know Your Customer form (hereinafter referred to as “KYC”) to Financial Intelligence Unit (hereinafter referred to as the “FIU”).

Order in respect of Edelweiss Broking Limited (Now known as Nuvama Wealth and Investment Limited) Page 3 of 27 6. As regards the second allegation i.e., non-reporting of ‘suspicious transactions’ to FIU by the noticee, the DA has observed that the noticee, as per paras 8, 9 and 2.2 of the guidelines of the SEBI Circular ISD/CIR/RR/AML/1/06 dated January 18, 2006, read with para 4 sub-clause (c) of Suspicious Transactions Report Guidelines mentioned under para 6 of SEBI Circular ISD/CIR/RR/AML/2/06 dated March 20, 2006 and para 10 and para 13 of SEBI Master Circular CIR/ISD/AML/3/2010 dated December 31, 2010 (hereinafter referred to as “SEBI PML Circulars”), was under an obligation to report certain transactions of Mr. Parekh to FIU, which it failed to do. The DA has found that by not adhering to the ‘SEBI PML Circulars’, the noticee failed to exercise due care and diligence, professionalism in the conduct of its business. Accordingly, the DA has recommended that the Certificate of Registration of the noticee (bearing no. INZ000005231), as a broker, may be suspended for a period of three months. The relevant excerpt of the Report is produced hereunder:

Order in respect of Edelweiss Broking Limited (Now known as Nuvama Wealth and Investment Limited) Page 4 of 27 8. The noticee, vide its letter dated October 31, 2022 filed its reply to the SCN and requested for an opportunity of personal hearing, which was accordingly granted to the noticee on January 17, 2023, through video conferencing.

Source: SecMarx — sebi:QJA/AB/MIRSD/MIRSD3/27592/2023-24. 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.