NEW DELHI: Capital markets regulator Sebi on Monday levied a penalty of Rs 16 lakh on Keshav Securities Ltd for misutilisation of clients' securities and funds.
The order came after the regulator conducted an inspection of Keshav Securities, a Sebi-registered stock broker from April 2020 to September 2021.
In its order, the Securities and Exchange Board of India (Sebi) found that the noticee (Keshav Securities) used the funds of its credit balance clients for settlement obligations of debit balance clients or its own purpose.
The estimated worth of misutilised funds by the noticee was Rs 1.75 crore.
Further, the regulator also found that Keshav Securities has failed and delayed in settling the funds of its clients in accordance with the market norms.
The regulator also observed that there was a mismatch between back office holdings of clients' securities and securities lying in the DP (Depository Participant) accounts in 12 instances amounting to Rs 1.50 crore.
''Noticee has not submitted the correct details to exchange regarding monitoring of client assets to exchange enhanced supervision framework. It was also observed that the funds of credit balance clients were being used for settlement/margin obligation of proprietary accounts,'' Sebi's Adjudicating Officer Barnali Mukherjee said in the order.
Further, it was also observed that the noticee has provided loans to other entities, reported incorrect value of the loans and defended its actions by stating that it was not aware that it could give loans to sister concerns.
''A person cannot defend his illegal actions by stating that he was not aware his actions were illegal, even if he honestly believed that they were not breaking the law. Thus the contention of the noticee is not tenable,'' said Mukherjee.
Through such acts Keshav Securities violated the market norms.
Meanwhile, in a separate order, the regulator cancelled the certificate of registration of Corptree Commodities for flouting regulatory norms in the matter of National Spot Exchange Ltd (NSEL).
The proceedings emanated from an enquiry report against Corptree Commodities by the regulator in the trading of 'paired contracts' during September 2009 to August 2013.
Thereafter, the regulator issued a show cause notice to the noticee in September 2018. The broker was member of NSEL and had facilitated trading in paired contracts on the NSEL platform.
In September 2009, NSEL had introduced the concept of 'paired contracts' on its platform, which involved buying and selling the same commodity at two different prices wherein investors could buy a short duration contract and sell a long duration contract and vice versa at the same time.