Sebi penalises Reliance Securities for breach of norms

Capital markets regulator Sebi on Friday slapped a monetary penalty of Rs 9 lakh on Reliance Securities for flouting market norms as well as stock brokers rules. The order came after the regulator and exchanges, NSE and BSE, had conducted a thematic onsite inspection of the books of accounts, records and other documents of authorised persons (APs) of Reliance Securities Ltd (RSL), a Sebi-registered stock broker.

The inspection was conducted to ascertain whether the same are being maintained in the manner required by RSL, with respect to provisions of stock brokers rules, NSEIL Capital Market (CM) regulations and NSE Future & Options (FO) trading norms.

The inspection was conducted for the period from April 2022 to December 2023.

Pursuant to the findings of inspection, Sebi issued a show cause notice to RSL on August 23, 2024.

In a 47-page order, Sebi found multiple violations committed by RSL and its authorised persons, including non-maintenance of adequate systems for recording client order placements, discrepancies in terminal locations, and lack of segregation at offices shared with other brokers.

The inspection also found that RSL failed to maintain required order placement records for offline clients mapped to its APs, namely Jitendra Kambad and Naitik Shah.

Sebi has mandated brokers to retain verifiable evidence of client orders to ensure transparency and prevent unauthorised trades.

However, RSL admitted to lapses but stated corrective measures had been undertaken, including deactivating terminals operated by unapproved users, the order said.

Further, Sebi has flagged unauthorised personnel operating these terminals, breaching norms requiring terminals to be handled only by approved users.

The inspection also exposed inadequate segregation at offices of RSL's authorised persons. At some locations, Sebi found that APs of RSL were found sharing premises and infrastructure with APs of other brokers, thereby violating rules.

The regulator noted that the lack of proper supervision allowed APs to engage in unauthorised activities, including receiving payments from clients for non-broking purposes.

RSL contended that certain discrepancies were inadvertent. It submitted that it took remedial steps, such as deactivating unapproved terminals and enhancing internal controls.

However, the regulator rejected these arguments, stating that brokers are required to maintain compliance at all times, and corrective measures post-inspection do not negate past violations.

By indulging in these activities, Reliance Securities contravened NSEL CM regulations, Stock Brokers and NSEL FO norms.