Groww pays Rs 47.85 lakh to settle allegations of stock-broker norms violations

Groww pays Rs 47.85 lakh to settle allegations of stock-broker norms violations

Groww Invest Tech has paid Rs 47.85 lakh to settle allegations that it had violated stock broker regulations and the market regulator's directions including those on anti-money laundering (AML) standards and combating the financing of terrorism (CFT).

In a settlement order issued on May 14, the Securities and Exchange Board of India (SEBI) stated that a showcause notice had been issued to the firm on November 25, 2024.

Pending adjudication proceedings, the firm proposed to settle the proceedings without admitting or denying the facts and conclusion of law. It filed an application dated January 30, 2025.

Pending adjudication proceedings, the firm proposed to settle the proceedings without admitting or denying the facts and conclusion of law. It filed an application dated January 30, 2025 and, on May 6, the applicant informed the regulator via email about the remittance of the settlement amount.

The showcause notice listed the following allegations.

1. Applicant (Groww) had sent retention statement containing incorrect information to clients viz. discrepancy in financial ledger balance and margin obligation in 38 instances.

2. During demo session of Applicants online trading app, it was observed that option of getting best available market price is not available to the investor and the ‘trading avenue preference’ coming as same as last used selection of the trading avenue for a given scrip.

3. During Demo session of Applicants online trading app and the RMS (risk management system) it was observed that Applicant had failed to provide the facility of Interoperability across Clearing Corporations to the investors.

4. Applicant was facilitating/offering non-securities product (payments via UPI as registered TPAP, lending, payment of utility bills i.e. electricity, internet) to its clients under the secured login of its trading app “Groww”. It was further observed that Applicant was offering payment service via UPI such as P2P, P2M, Bill payment and other payments under capacity of Third Party Application Providers (TRAP) through Applicant’s app which may involve personal financial liability in the event of dispute redressal with respect to a UPI transaction on trading application of the stock broker.

5. During the walk through of Groww's RMS/order management system (OMS) and analysis of a tech glitch, it was observed that Groww failed to implement additional solution where clients can access their trading activities in the event of failure of the app and web, and that Groww had reviewed its business continuity plan (BCP) annually instead of on half-yearly basis.

6. Groww failed to implement a surveillance framework where the trading activities are analyzed through financial ability of the client and also failed to conduct necessary due diligence and Groww did not update the financial/ income details in 83 instances of 41 clients.

7. Groww had no system/alert in place to identify/measures margin/pay-in obligation which does not commensurate with financial capacity of the client.