Jainam Broking's APs found to be using 'wealth', 'advisory' in names; Sebi fines Rs 6 lakh

The other violations included the APs now keeping sufficient records of clients placing the orders executed in their names and APs' terminals being operated by unapproved third parties.

Jainam Broking has been fined Rs 6 lakh for various violations done by their authorised persons (APs), including the latter using non-permissable words such as wealth advisory or investment advisory in their names, and the brokerage's poor monitoring of the APs' practices.

In an order issued on August 29, the Securities and Exchange Board of India (Sebi) has said that, out of a same of 742 APs, eight APs were found to be using non-permissable words.

The other violations included the APs now keeping sufficient records of clients placing the orders executed in their names, APs' terminals being operated by unapproved third parties, APs' terminals being placed in unapproved locations, one AP not operating from a location reported by the brokerage to the exchanges and irregularities in the office management of four APs.

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The order noted, "it is the duty and obligation of the Noticee (Jainam) to ensure that all APs registered with it should abide by all applicable laws The non-adherence on the part of the Noticee to the extant Regulations, Circulars, etc. as brought out in the preceding paragraphs, clearly shows that the Noticee has failed to act with skill, care, and diligence in supervising its APs and to ensure that APs are in adherence to the applicable laws.

The order also noted that, once it was brought to the brokerage's attention, some corrective measures were taken by Jainam such as cancelling the registration of APs who have not changed their names according to Sebi's directives, reporting the new location from where two APs were operating, ensuring that the notice board of tbe brokerage was displayed at the location of APs and so on.

These corrective measures were taken into consideration while deciding the penalty.

Two years to correct a board?

On one of the violations, on the irregularities in the office management of its APs, which included the AP not displaying a board carrying the details of the brokerage it was aligned to, Jainam submitted that the notice board was missing because it had been sent to the vendor for correcting the name.

But Sebi's investigating officials noted that details available on the Ministry of Corporate Affairs (MCA) showed that the brokerage's name was changed in September 20, 2021, and then on November 9, 2021. The regulator's inspection of the AP's premises was done two years later, on November 7, 2023, and November 8, 2023.

That is, two years had passed since the name change and the inspection.

Therefore, Sebi's officials found Jainam's claim that the old board was sent to the vendor for modification "an afterthought".

The order also noted that this rationale was not put forward by the APs themselves when the inspection was being done.

Given all this, they did not find that the brokerage's submission in this regard could be accepted.