Axis Securities pays Rs 14.62 lakh to settle allegations of violation of Stock Brokers Regulations

The noticed dated June 4, 2024, was sent to the broker, who then filed an application dated July 23, 2024, to settle the proceedings.

Axis Securities has paid Rs 14.62 lakh to settle allegations of violations of Stock Brokers Regulations.

In a settlement order issued on December 4, the Securities and Exchange Board of India (SEBI) said that a showcause notice had been issued to Axis Securities after investigations prima facie showed that a dealer of the broker had colluded with a friend to front-run trades of a big client.

Also read: SEBI proposes that stock exchanges do online monitoring of system audit of stock brokers

As the order issued by SEBI's adjudicating officer G Ramar stated, "Investigation prima facie found that Vikrant Bhimrao Kadam (worked as a dealer with the Applicant [Axis Securities]) and his childhood friend Mandar Ulhas Bhatkar were front-running the trades of the Big Client in the equity and derivatives segments of NSE. Further, it was also observed and alleged that the Applicant had failed to exercise due diligence as per its dealer and Branch manager compliance policy, which was in violation of SEBI (Stock Brokers) Regulations, 1992 (“Broker Regulations”)."

The noticed dated June 4, 2024, was sent to the broker, who then filed an application dated July 23, 2024, to settle the proceedings "without admitting or denying the findings of fact and conclusions of law".

Showcause notice

In the notice sent to the broker, the following allegations were made:

1.Mandar Ulhas Bhatkar received funds from Vikrant Bhimrao Kadam, which was transferred to his broker Zerodha in order to enable Vikrant Bhimrao Kadam to trade in the scrips/contracts in which the Big Client traded. Further, he had given his consent to Vikrant Bhimrao Kadam to trade in the securities market through his trading account. Therefore, Mandar Ulhas Bhatkar and Vikrant Bhimrao Kadam together in collusion took advantage of the orders/trades of Big Client by front running the orders/trades of Big Client and earned huge profits.

2.Accordingly, the investigation revealed that the Dealer & Branch Manager Compliance Policy was breached by certain staff members in different cities of India where branches of Applicant (Axis Securities) are located. This casual approach of Applicant resulted in its dealer i.e., Vikrant Bhimrao Kadam in colluding with his friend i.e., Mandar Ulhas Bhatkar, to carry out front running activities using mobile phone from the premises of Applicant.

3.Therefore, it was alleged that as a stock broker the Applicant failed to exercise appropriate due diligence as required in its Dealer & Branch Manager Compliance Policy, and accordingly it violated the provisions of Clause A(2) and (5) of Schedule II read with Regulation 9 of SEBI (Stock Brokers) Regulations 1992.

Therefore, the broker was asked why appropriate directions under provisions of the SEBI Act should not be issued against it.