SEBI passes consent order against Reliance Securities

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SEBI passes consent order against Reliance Securities

Securities and Exchange Board of India (SEBI) has passed a consent order against Reliance Securities for alleged violation of the code of conduct, reports CNBC-TV18’s Sajeet Manghat.

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Excerpts from Reporter's Diary on CNBC-TV18 Watch the full show » Rel Capital BSE | NSE 30/05/12 Are Mutual Funds betting on Rel Capital? Other Stocks in this news Reliance Natural Resources | Reliance Infrastructure |

Securities and Exchange Board of India (SEBI) has passed a consent order against Reliance Securities for alleged violation of the code of conduct, reports CNBC-TV18's Sajeet Manghat.

Here is a verbatim transcript of Sajeet Manghat's comments on CNBC-TV18. Also watch the accompanying video.

This is a second consent order against the Anil Dhirubhai Ambani Group. The first one was with regards to Reliance Natural Resources and Reliance Infra . The second one is with regards to Reliance Securities, trading arm of Reliance Capital .

What SEBI has basically agreed upon is that Reliance Securities will stop new registrations of clients for the next 45 days. The second thing, which they have agreed to, is to pay a fine of Rs 25 lakh. The third one is that they are going to spend nearly Rs 1 crore on investor education going forward.

Now, SEBI had sent them a showcause notice. This was for a period of April 1, 2007 to March 31, 2009. In the audit, which they did at that point of time, they have found prima facie violations of code of conduct on behalf of Reliance Securities and the investigation proceeded from there.

Reliance Securities has voluntarily presented these consent terms and SEBI gas agreed to these consent terms. Hence, this consent order has been passed today.

The irregularities include applicant did not have documentary proof like leave and lease licenses approved for payments, rent or ownership of office. Also, the fact that the applicant collected cheques in the name of Reliance Money, applicant collected excess securities transaction tax from clients during 2006-2008. All these are some of the violations, which SEBI has found in it's investigation.

Now, it doesn't mean that they are guilty of this because they have entered into a consent term. As per the consent, term they have agreed to settle the case for a fine of Rs 25 lakhs and also agreed that they will spent Rs 1 crore on investor education going forward in the next six months. So that's a good point that it's a settlement between Reliance Securities and the regulator on the violations of code of conduct.

It is sentimentally dampening for the ADA pack. After the Reliance Natural Resource and Reliance Infra consent order, there was some pressure on Reliance ADA group because of the violations that were mentioned as part of the balance sheet and annual report. This would also add to that sentiment primarily. But it is not material enough in any sense, it is just a code of conduct and some documentary irregularities, which have been found by SEBI, but not proved because they haven't gone ahead with the investigation or with the arguments in SEBI. So, they have prima facie agreed to settle it before SEBI. The consent terms have been given on a voluntary basis by ADAG group to SEBI's high level committee and the high level committee has gone ahead and agreed to the consent terms. So, even though it's a penalty, it might have more of a sentimental value or impact on the Reliance Capital stock tomorrow.