Sebi Cancels Registration Of Fairwealth Commodity Broking For Misusing Clients' Funds

Capital markets regulator Sebi on Wednesday cancelled the registration of Fairwealth Commodity Broking Pvt (FCBL) as a broker for misusing clients' funds.
     
This order would come into force with immediate effect, the Securities and Exchange Board of India (Sebi) said.
     
The present matter emanates from the findings in respect of the inspection carried out by Sebi of FCBL during the period from April 2017 to December 2018.
     
In its probe, Sebi found "FCBL had carried out acts that resulted in – failure to segregate client funds from own funds; misuse of clients' funds; non-settlement of clients' funds; providing wrong/incomplete enhanced supervision data; improper client registration process; and incorrect mobile number and email ID".
     
The brokerage house on three trading days, out of the sample 36 trading days chosen for inspection, had misused the funds of clients, the regulator said in its 25-page report.
     
Also, there were many instances where settlement of funds of clients hadn't happened for even 180 days. This resulted in large sums of money, that belonged to the clients, being in the hands of FCBL, it added.
     
Further, there was failure in segregation of the funds of the clients from those of FCBL.
     
Cancelling the registration on various grounds, Sebi said that the broking firm had entered incorrect mobile numbers and email IDs in respect of Unique Client Codes (UCCs)/ and in certain cases the same mobile numbers and email IDs had been used in respect of multiple UCCs.
     
Additionally, FCBL had not carried out client registration in the stipulated manner and had not provided correct enhanced supervision data.
     
Through such acts, FCBL has violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms and the code of conduct stipulated for stock brokers.
     
Accordingly, the markets regulator has directed to cancel "the certificate of registration of the noticee -- Fairwealth Commodity Broking Pvt Ltd as a stock broker in commodity derivative segment".
     
FCBL is registered with Sebi as a commodity derivatives broker and is a member of the Multi Commodity Exchange of India Ltd (MCX) and National Commodity and Derivatives Exchange Ltd (NCDEX).