Under the rules, a stock broker shall maintain high standards of integrity, exercise due skill and care and comply with statutory requirements, which were not followed by ABL
Capital markets regulator SEBI has slapped a fine of Rs 10 lakh on brokerage firm Angel Broking Ltd for alleged violation of regulatory norms. Angel Broking Ltd (now known as Angel One Ltd) is a SEBI-registered stock and commodity broker. The firm is listed on both the bourses -- BSE and NSE.
The order came after SEBI along with the stock exchanges and the depositories conducted a comprehensive joint inspection of the functioning of Angel Broking Ltd (ABL).
The period of inspection was from April 2019 to December 2020. Based on the findings of the inspection, the markets watchdog initiated adjudication proceedings against ABL.
In its 78-page order, SEBI found that ABL pledged securities of clients who have a credit balance in their ledger and the mis-utilisation was to the extent of Rs 32.97 crore.
Also, the regulator observed that the noticee (ABL) did not do actual settlement of funds of inactive clients during the inspection period in 300 instances and the non-settled amount was Rs 43.96 lakh.
Further, ABL did not do actual settlement of funds of clients who did not trade in the last three months in 1,081 instances and the non-settled amount was Rs 16.65 lakh.
ABL had retained the value of funds & securities to the extent of the value of turnover executed on the date of settlement in the cash market segment after January 2020 was 85 instances and deemed non-settled amount was Rs 10.26 lakh, thereby violating the rules.
The noticee had also not done periodic reconciliation between depository participant accounts and back office records and there was a total quantity difference of 44.72 lakh having absolute value of Rs 1,226.73 crore, SEBI said in the order passed on Friday.
Despite non-recovery of debit balances, the regulator also observed that the Noticee has provided exposure to the client beyond T+2+5 days, amounting to Rs 2.10 crore.
The noticee submitted to the inspection team that MTM (Mark-to-Market) generated from the position in the derivative segment was considered towards granting of exposure.
However, it failed to provide any evidence to corroborate its submission and thereby not complied with the rules, the regulator said.
It also observed that the ABL had reported incorrect ledger balances of 30,602 clients and net difference of Rs 340.81 crore to the exchange for the month of October 2020 and there was a mismatch between fund balances as per ledger and daily margin statement, it added.
Under the rules, a stock broker shall maintain high standards of integrity, exercise due skill and care and comply with statutory requirements, which were not followed by ABL.
Therefore, ABL did not exercise due skill and care with regard to maintenance of clients records, thereby flouted the Code of Conduct of broker regulations, it added.