sebi:WTM/RKA/IVD/ID-6/44/2012
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Facts / Headnote
Certificate of registration of the stock broker suspended for a period of two months
Provisions invoked
- s. 19
Regulations
- Reg. 7
- Reg. 21(1)
- Reg. 28(2)
- Reg. 17(1)(g)
- Reg. 28
- Reg. 17(2)
- Reg. 17(1)(e)
Parties
- Mahesh Kothari Share and Stock Brokers Pvt. Ltd. (MKSSB)
Holding
The noticee, Mahesh Kothari Share and Stock Brokers Pvt. Ltd., was found guilty of violating regulations 17(1)(e) and 17(2) of the Stock Broker Regulations, Clauses A(1), A(2), A(5) and C(6) of the Code of Conduct, and several SEBI circulars, and its certificate of registration was suspended for two months.
Full text
Page 2 of 14 2. Vide another order dated January 28, 2010, an inspection of the MKSSB was ordered to look into its books of accounts, the procedures adopted by it for safe keeping of the clients’ securities and funds and their compliance with the rules, regulations, bye laws and other requirements.
Page 3 of 14 Facility’, despite having sufficient credit balance in the clients’ account. Thus, it mis- utilized the clients securities. The noticee did not have adequate system and procedures to ensure that client collateral is used for meeting client's margin requirement/pay-in only. It also failed to ensure proper audit trail of the use of the client collateral. All these acts of the noticee resulted in violation of Clause A(1) and (5) of the Code of Conduct for stock brokers prescribed in schedule II read with regulation 7 of the Stock Broker Regulations SEBI Circular no. MRD/DoP/SE/Cir- 11/2008 dated April 17, 2008. (iii) The noticee had not segregated its own securities from that of MKSSB. It had also not segregated its own securities from that of its clients and has also not segregated securities of various clients. Further, the noticee had also pledged the shares of their clients with the bank for the purpose of availing ‘Over Draft facility’ despite sufficient credit balance in the accounts. Therefore, the noticee violated Clause A (1), (2), (5) and C(6) of the Code of Conduct prescribed for stock brokers as specified in the Schedule II read with regulation 7 of the Stock Brokers Regulations read with SEBI Circular no. SMD/SED/CIR/93/23321 dated November 18, 1993 and SEBI Circular no. MIRSD/DPS- 1/Cir-31/2004 dated August 26, 2004. (iv) There were discrepancies in KYC in respect of five of its clients resulting in violation of SEBI Circular no. SEBI/MIRSD/DPS-1/Cir-3
Page 4 of 14 (x) The noticee had not maintained the ‘register of securities’ and proper documents showing client-wise and scrip-wise registers of securities showing the actual movement of shares in the pool account, beneficiary account and also the off-market transfers and violated regulation 17(1)(g) of the Stock Broker Regulations. (xi) The noticee had provided wrong/incomplete data, that too with undue delay on several occasions. Further, the noticee had not given access to the inspection team of SEBI to its back office, despite various reminders. It, therefore, violated regulation 21(1), (2) and (4) of the Stock Brokers Regulations. (xii)The noticee had not intimated SEBI about the place where its books of account, records and documents were maintained resulting in violation of regulation 17(2) read with Clause A(1) and C(6) of the Code of Conduct prescribed for stock brokers as specified in the Schedule II read with Regulation 7 of the Stock Broker Regulations.
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Source: SecMarx — sebi:WTM/RKA/IVD/ID-6/44/2012. 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.